Correlation Between Sands China and Wynn Macau
Can any of the company-specific risk be diversified away by investing in both Sands China and Wynn Macau 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 Sands China and Wynn Macau into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sands China Ltd and Wynn Macau, you can compare the effects of market volatilities on Sands China and Wynn Macau 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 Sands China with a short position of Wynn Macau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sands China and Wynn Macau.
Diversification Opportunities for Sands China and Wynn Macau
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sands and Wynn is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sands China Ltd and Wynn Macau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Macau and Sands China 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 Sands China Ltd are associated (or correlated) with Wynn Macau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Macau has no effect on the direction of Sands China i.e., Sands China and Wynn Macau go up and down completely randomly.
Pair Corralation between Sands China and Wynn Macau
Assuming the 90 days horizon Sands China Ltd is expected to generate 1.23 times more return on investment than Wynn Macau. However, Sands China is 1.23 times more volatile than Wynn Macau. It trades about -0.09 of its potential returns per unit of risk. Wynn Macau is currently generating about -0.27 per unit of risk. If you would invest 2,649 in Sands China Ltd on August 29, 2024 and sell it today you would lose (153.00) from holding Sands China Ltd or give up 5.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sands China Ltd vs. Wynn Macau
Performance |
| Timeline |
| Sands China |
| Wynn Macau |
Sands China and Wynn Macau Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sands China and Wynn Macau
The main advantage of trading using opposite Sands China and Wynn Macau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sands China position performs unexpectedly, Wynn Macau 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 Wynn Macau will offset losses from the drop in Wynn Macau's long position.| Sands China vs. SJM Holdings Ltd | Sands China vs. Studio City International | Sands China vs. Monarch Casino Resort | Sands China vs. Playa Hotels Resorts |
| Wynn Macau vs. Studio City International | Wynn Macau vs. Monarch Casino Resort | Wynn Macau vs. Playa Hotels Resorts | Wynn Macau vs. Las Vegas Sands |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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