Correlation Between MGM Resorts and Deckers Outdoor
Can any of the company-specific risk be diversified away by investing in both MGM Resorts and Deckers Outdoor 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 Deckers Outdoor 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 Deckers Outdoor, you can compare the effects of market volatilities on MGM Resorts and Deckers Outdoor 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 Deckers Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM Resorts and Deckers Outdoor.
Diversification Opportunities for MGM Resorts and Deckers Outdoor
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between MGM and Deckers is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor 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 Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of MGM Resorts i.e., MGM Resorts and Deckers Outdoor go up and down completely randomly.
Pair Corralation between MGM Resorts and Deckers Outdoor
Considering the 90-day investment horizon MGM Resorts is expected to generate 19.11 times less return on investment than Deckers Outdoor. But when comparing it to its historical volatility, MGM Resorts International is 1.28 times less risky than Deckers Outdoor. It trades about 0.03 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 17,708 in Deckers Outdoor on September 12, 2024 and sell it today you would earn a total of 2,787 from holding Deckers Outdoor or generate 15.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGM Resorts International vs. Deckers Outdoor
Performance |
| Timeline |
| MGM Resorts International |
| Deckers Outdoor |
MGM Resorts and Deckers Outdoor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGM Resorts and Deckers Outdoor
The main advantage of trading using opposite MGM Resorts and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts position performs unexpectedly, Deckers Outdoor 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 Deckers Outdoor will offset losses from the drop in Deckers Outdoor's long position.| MGM Resorts vs. Wynn Resorts Limited | MGM Resorts vs. Caesars Entertainment | MGM Resorts vs. Melco Resorts Entertainment | MGM Resorts vs. Penn National Gaming |
| Deckers Outdoor vs. On Holding | Deckers Outdoor vs. Skechers USA | Deckers Outdoor vs. Nike Inc | Deckers Outdoor vs. Steven Madden |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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