Correlation Between MGM Resorts and Applied Materials
Can any of the company-specific risk be diversified away by investing in both MGM Resorts and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on MGM Resorts and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM Resorts and Applied Materials.
Diversification Opportunities for MGM Resorts and Applied Materials
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MGM and Applied is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of MGM Resorts i.e., MGM Resorts and Applied Materials go up and down completely randomly.
Pair Corralation between MGM Resorts and Applied Materials
Assuming the 90 days trading horizon MGM Resorts is expected to generate 2.91 times less return on investment than Applied Materials. But when comparing it to its historical volatility, MGM Resorts International is 1.1 times less risky than Applied Materials. It trades about 0.03 of its potential returns per unit of risk. Applied Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 259,185 in Applied Materials on September 3, 2024 and sell it today you would earn a total of 113,815 from holding Applied Materials or generate 43.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM Resorts International vs. Applied Materials
Performance |
| Timeline |
| MGM Resorts International |
| Applied Materials |
MGM Resorts and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM Resorts and Applied Materials
The main advantage of trading using opposite MGM Resorts and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| MGM Resorts vs. Verizon Communications | MGM Resorts vs. Grupo Sports World | MGM Resorts vs. GMxico Transportes SAB | MGM Resorts vs. New Oriental Education |
| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. SPDR Series Trust | Applied Materials vs. Vanguard World |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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