Correlation Between United States and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Melco Resorts Entertainment, you can compare the effects of market volatilities on United States 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 United States with a short position of Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Melco Resorts.
Diversification Opportunities for United States and Melco Resorts
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Melco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Melco Resorts go up and down completely randomly.
Pair Corralation between United States and Melco Resorts
Assuming the 90 days trading horizon United States Steel is expected to generate 1.31 times more return on investment than Melco Resorts. However, United States is 1.31 times more volatile than Melco Resorts Entertainment. It trades about -0.01 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.42 per unit of risk. If you would invest 20,706 in United States Steel on October 12, 2024 and sell it today you would lose (328.00) from holding United States Steel or give up 1.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Melco Resorts Entertainment
Performance |
| Timeline |
| United States Steel |
| Melco Resorts Entert |
United States and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Melco Resorts
The main advantage of trading using opposite United States and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. KB Financial Group | United States vs. Discover Financial Services | United States vs. Broadridge Financial Solutions, | United States vs. Synchrony Financial |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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