Correlation Between SJM Holdings and MGM China
Can any of the company-specific risk be diversified away by investing in both SJM Holdings and MGM China 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 SJM Holdings and MGM China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SJM Holdings Ltd and MGM China Holdings, you can compare the effects of market volatilities on SJM Holdings and MGM China 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 SJM Holdings with a short position of MGM China. Check out your portfolio center. Please also check ongoing floating volatility patterns of SJM Holdings and MGM China.
Diversification Opportunities for SJM Holdings and MGM China
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SJM and MGM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SJM Holdings Ltd and MGM China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM China Holdings and SJM Holdings 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 SJM Holdings Ltd are associated (or correlated) with MGM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM China Holdings has no effect on the direction of SJM Holdings i.e., SJM Holdings and MGM China go up and down completely randomly.
Pair Corralation between SJM Holdings and MGM China
Assuming the 90 days horizon SJM Holdings Ltd is expected to under-perform the MGM China. In addition to that, SJM Holdings is 2.94 times more volatile than MGM China Holdings. It trades about -0.22 of its total potential returns per unit of risk. MGM China Holdings is currently generating about -0.25 per unit of volatility. If you would invest 1,611 in MGM China Holdings on August 29, 2024 and sell it today you would lose (167.00) from holding MGM China Holdings or give up 10.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SJM Holdings Ltd vs. MGM China Holdings
Performance |
| Timeline |
| SJM Holdings |
| MGM China Holdings |
SJM Holdings and MGM China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SJM Holdings and MGM China
The main advantage of trading using opposite SJM Holdings and MGM China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SJM Holdings position performs unexpectedly, MGM China 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 China will offset losses from the drop in MGM China's long position.| SJM Holdings vs. Studio City International | SJM Holdings vs. Monarch Casino Resort | SJM Holdings vs. Playa Hotels Resorts | SJM Holdings vs. Las Vegas Sands |
| MGM China vs. Studio City International | MGM China vs. Monarch Casino Resort | MGM China vs. Playa Hotels Resorts | MGM China 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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