Correlation Between MGM China and Dow Jones
Can any of the company-specific risk be diversified away by investing in both MGM China and Dow Jones at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MGM China and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGM China Holdings and Dow Jones Industrial, you can compare the effects of market volatilities on MGM China and Dow Jones and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MGM China with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM China and Dow Jones.
Diversification Opportunities for MGM China and Dow Jones
Good diversification
The 3 months correlation between MGM and Dow is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and MGM China is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MGM China Holdings are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of MGM China i.e., MGM China and Dow Jones go up and down completely randomly.
Pair Corralation between MGM China and Dow Jones
Assuming the 90 days horizon MGM China Holdings is expected to generate 6.05 times more return on investment than Dow Jones. However, MGM China is 6.05 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 1,053 in MGM China Holdings on August 25, 2024 and sell it today you would earn a total of 417.00 from holding MGM China Holdings or generate 39.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.26% |
| Values | Daily Returns |
MGM China Holdings vs. Dow Jones Industrial
Performance |
| Timeline |
MGM China and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
MGM China Holdings
Pair trading matchups for MGM China
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with MGM China and Dow Jones
The main advantage of trading using opposite MGM China and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM China position performs unexpectedly, Dow Jones can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow Jones will offset losses from the drop in Dow Jones' long position.| MGM China vs. SJM Holdings Ltd | MGM China vs. Studio City International | MGM China vs. Monarch Casino Resort | MGM China vs. Playa Hotels Resorts |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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