Correlation Between MGM China and SJM Holdings
Can any of the company-specific risk be diversified away by investing in both MGM China and SJM Holdings 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 SJM Holdings 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 SJM Holdings Ltd, you can compare the effects of market volatilities on MGM China and SJM Holdings 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 SJM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM China and SJM Holdings.
Diversification Opportunities for MGM China and SJM Holdings
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MGM and SJM is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MGM China Holdings and SJM Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM Holdings 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 SJM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJM Holdings has no effect on the direction of MGM China i.e., MGM China and SJM Holdings go up and down completely randomly.
Pair Corralation between MGM China and SJM Holdings
Assuming the 90 days horizon MGM China Holdings is expected to generate 0.36 times more return on investment than SJM Holdings. However, MGM China Holdings is 2.78 times less risky than SJM Holdings. It trades about -0.12 of its potential returns per unit of risk. SJM Holdings Ltd is currently generating about -0.22 per unit of risk. If you would invest 1,562 in MGM China Holdings on August 25, 2024 and sell it today you would lose (92.00) from holding MGM China Holdings or give up 5.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM China Holdings vs. SJM Holdings Ltd
Performance |
| Timeline |
| MGM China Holdings |
| SJM Holdings |
MGM China and SJM Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM China and SJM Holdings
The main advantage of trading using opposite MGM China and SJM Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM China position performs unexpectedly, SJM Holdings 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 SJM Holdings will offset losses from the drop in SJM Holdings' 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 |
| SJM Holdings vs. Sands China Ltd | SJM Holdings vs. Studio City International | SJM Holdings vs. Monarch Casino Resort | SJM Holdings vs. Playa Hotels Resorts |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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