Correlation Between Microsoft and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Microsoft and MGM Resorts 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 Microsoft and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MGM Resorts International, you can compare the effects of market volatilities on Microsoft and MGM Resorts 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 Microsoft with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MGM Resorts.
Diversification Opportunities for Microsoft and MGM Resorts
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and MGM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MGM Resorts International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM Resorts International and Microsoft 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 Microsoft are associated (or correlated) with MGM Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM Resorts International has no effect on the direction of Microsoft i.e., Microsoft and MGM Resorts go up and down completely randomly.
Pair Corralation between Microsoft and MGM Resorts
Given the investment horizon of 90 days Microsoft is expected to generate 0.51 times more return on investment than MGM Resorts. However, Microsoft is 1.96 times less risky than MGM Resorts. It trades about 0.06 of its potential returns per unit of risk. MGM Resorts International is currently generating about 0.02 per unit of risk. If you would invest 36,854 in Microsoft on September 4, 2024 and sell it today you would earn a total of 6,244 from holding Microsoft or generate 16.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. MGM Resorts International
Performance |
| Timeline |
| Microsoft |
| MGM Resorts International |
Microsoft and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and MGM Resorts
The main advantage of trading using opposite Microsoft and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, MGM Resorts 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 MGM Resorts will offset losses from the drop in MGM Resorts' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| MGM Resorts vs. DXC Technology | MGM Resorts vs. Lloyds Banking Group | MGM Resorts vs. Verizon Communications | MGM Resorts vs. Taiwan Semiconductor Manufacturing |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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