Correlation Between Verizon Communications and MGM Resorts
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and MGM Resorts International, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and MGM Resorts.
Diversification Opportunities for Verizon Communications and MGM Resorts
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Verizon and MGM is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and MGM Resorts go up and down completely randomly.
Pair Corralation between Verizon Communications and MGM Resorts
Assuming the 90 days horizon Verizon Communications is expected to generate 0.8 times more return on investment than MGM Resorts. However, Verizon Communications is 1.25 times less risky than MGM Resorts. It trades about 0.08 of its potential returns per unit of risk. MGM Resorts International is currently generating about 0.02 per unit of risk. If you would invest 63,419 in Verizon Communications on September 4, 2024 and sell it today you would earn a total of 25,891 from holding Verizon Communications or generate 40.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. MGM Resorts International
Performance |
| Timeline |
| Verizon Communications |
| MGM Resorts International |
Verizon Communications and MGM Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and MGM Resorts
The main advantage of trading using opposite Verizon Communications and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Fomento Econmico Mexicano | Verizon Communications vs. Grupo Mxico SAB | Verizon Communications vs. Grupo Financiero Banorte | Verizon Communications vs. Alfa SAB de |
| MGM Resorts vs. DXC Technology | MGM Resorts vs. Lloyds Banking Group | MGM Resorts vs. Verizon Communications | MGM Resorts vs. Taiwan Semiconductor Manufacturing |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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