Correlation Between Melco International and SJM Holdings
Can any of the company-specific risk be diversified away by investing in both Melco International 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 Melco International and SJM Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melco International Development and SJM Holdings Ltd, you can compare the effects of market volatilities on Melco International 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 Melco International with a short position of SJM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco International and SJM Holdings.
Diversification Opportunities for Melco International and SJM Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Melco and SJM is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Melco International Developmen and SJM Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM Holdings and Melco International 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 Melco International Development 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 Melco International i.e., Melco International and SJM Holdings go up and down completely randomly.
Pair Corralation between Melco International and SJM Holdings
Assuming the 90 days horizon Melco International Development is expected to under-perform the SJM Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Melco International Development is 1.8 times less risky than SJM Holdings. The pink sheet trades about -0.07 of its potential returns per unit of risk. The SJM Holdings Ltd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 147.00 in SJM Holdings Ltd on August 30, 2024 and sell it today you would lose (37.00) from holding SJM Holdings Ltd or give up 25.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melco International Developmen vs. SJM Holdings Ltd
Performance |
| Timeline |
| Melco International |
| SJM Holdings |
Melco International and SJM Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco International and SJM Holdings
The main advantage of trading using opposite Melco International and SJM Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco International 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.| Melco International vs. Las Vegas Sands | Melco International vs. MGM Resorts International | Melco International vs. Caesars Entertainment | Melco International vs. Wynn Resorts Limited |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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