Correlation Between Melco Resorts and Studio City
Can any of the company-specific risk be diversified away by investing in both Melco Resorts and Studio City 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 Resorts and Studio City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melco Resorts Entertainment and Studio City International, you can compare the effects of market volatilities on Melco Resorts and Studio City 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 Resorts with a short position of Studio City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Studio City.
Diversification Opportunities for Melco Resorts and Studio City
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Melco and Studio is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Studio City International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Studio City International and Melco 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 Melco Resorts Entertainment are associated (or correlated) with Studio City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Studio City International has no effect on the direction of Melco Resorts i.e., Melco Resorts and Studio City go up and down completely randomly.
Pair Corralation between Melco Resorts and Studio City
Given the investment horizon of 90 days Melco Resorts Entertainment is expected to under-perform the Studio City. But the stock apears to be less risky and, when comparing its historical volatility, Melco Resorts Entertainment is 1.27 times less risky than Studio City. The stock trades about -0.26 of its potential returns per unit of risk. The Studio City International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 625.00 in Studio City International on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Studio City International or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Melco Resorts Entertainment vs. Studio City International
Performance |
| Timeline |
| Melco Resorts Entert |
| Studio City International |
Melco Resorts and Studio City Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco Resorts and Studio City
The main advantage of trading using opposite Melco Resorts and Studio City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts position performs unexpectedly, Studio City 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 Studio City will offset losses from the drop in Studio City's long position.| Melco Resorts vs. Wynn Resorts Limited | Melco Resorts vs. MGM Resorts International | Melco Resorts vs. Caesars Entertainment | Melco Resorts vs. Penn National Gaming |
| Studio City vs. Golden Entertainment | Studio City vs. Red Rock Resorts | Studio City vs. Century Casinos | Studio City vs. Ballys Corp |
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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