Correlation Between Micron Technology and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Micron Technology 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 Micron Technology and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and MGM Resorts International, you can compare the effects of market volatilities on Micron Technology 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 Micron Technology with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and MGM Resorts.
Diversification Opportunities for Micron Technology and MGM Resorts
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Micron and MGM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology 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 Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and MGM Resorts go up and down completely randomly.
Pair Corralation between Micron Technology and MGM Resorts
Assuming the 90 days horizon Micron Technology is expected to under-perform the MGM Resorts. In addition to that, Micron Technology is 1.18 times more volatile than MGM Resorts International. It trades about -0.01 of its total potential returns per unit of risk. MGM Resorts International is currently generating about 0.04 per unit of volatility. If you would invest 70,700 in MGM Resorts International on September 2, 2024 and sell it today you would earn a total of 7,100 from holding MGM Resorts International or generate 10.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Micron Technology vs. MGM Resorts International
Performance |
| Timeline |
| Micron Technology |
| MGM Resorts International |
Micron Technology and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and MGM Resorts
The main advantage of trading using opposite Micron Technology and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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.The idea behind Micron Technology and MGM Resorts International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MGM Resorts vs. Applied Materials | MGM Resorts vs. CVS Health | MGM Resorts vs. McEwen Mining | MGM Resorts vs. Cognizant Technology Solutions |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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