Correlation Between Snap and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Snap and Melco 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 Snap and Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Melco Resorts Entertainment, you can compare the effects of market volatilities on Snap and Melco 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 Snap with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Melco Resorts.
Diversification Opportunities for Snap and Melco Resorts
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Snap and Melco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert and Snap 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 Snap Inc are associated (or correlated) with Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Snap i.e., Snap and Melco Resorts go up and down completely randomly.
Pair Corralation between Snap and Melco Resorts
Given the investment horizon of 90 days Snap Inc is expected to generate 1.37 times more return on investment than Melco Resorts. However, Snap is 1.37 times more volatile than Melco Resorts Entertainment. It trades about 0.0 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about 0.0 per unit of risk. If you would invest 1,414 in Snap Inc on August 27, 2024 and sell it today you would lose (272.00) from holding Snap Inc or give up 19.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Melco Resorts Entertainment
Performance |
| Timeline |
| Snap Inc |
| Melco Resorts Entert |
Snap and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Melco Resorts
The main advantage of trading using opposite Snap and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Melco 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 Melco Resorts will offset losses from the drop in Melco Resorts' long position.The idea behind Snap Inc and Melco Resorts Entertainment 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.| Melco Resorts vs. Wynn Resorts Limited | Melco Resorts vs. MGM Resorts International | Melco Resorts vs. Caesars Entertainment | Melco Resorts vs. Penn National Gaming |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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