Correlation Between MGM Resorts and Las Vegas
Can any of the company-specific risk be diversified away by investing in both MGM Resorts and Las Vegas 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 Resorts and Las Vegas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGM Resorts International and Las Vegas Sands, you can compare the effects of market volatilities on MGM Resorts and Las Vegas 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 Resorts with a short position of Las Vegas. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM Resorts and Las Vegas.
Diversification Opportunities for MGM Resorts and Las Vegas
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MGM and Las is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands and MGM Resorts 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 Resorts International are associated (or correlated) with Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of MGM Resorts i.e., MGM Resorts and Las Vegas go up and down completely randomly.
Pair Corralation between MGM Resorts and Las Vegas
Assuming the 90 days horizon MGM Resorts International is expected to under-perform the Las Vegas. But the stock apears to be less risky and, when comparing its historical volatility, MGM Resorts International is 1.2 times less risky than Las Vegas. The stock trades about -0.01 of its potential returns per unit of risk. The Las Vegas Sands is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,468 in Las Vegas Sands on November 2, 2024 and sell it today you would earn a total of 967.00 from holding Las Vegas Sands or generate 27.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM Resorts International vs. Las Vegas Sands
Performance |
| Timeline |
| MGM Resorts International |
| Las Vegas Sands |
MGM Resorts and Las Vegas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM Resorts and Las Vegas
The main advantage of trading using opposite MGM Resorts and Las Vegas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts position performs unexpectedly, Las Vegas 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 Las Vegas will offset losses from the drop in Las Vegas' long position.| MGM Resorts vs. Las Vegas Sands | MGM Resorts vs. Galaxy Entertainment Group | MGM Resorts vs. Sands China | MGM Resorts vs. Wynn Resorts Limited |
| Las Vegas vs. Galaxy Entertainment Group | Las Vegas vs. Sands China | Las Vegas vs. MGM Resorts International | Las Vegas vs. Wynn Resorts Limited |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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