Correlation Between Wynn Resorts and Melco International
Can any of the company-specific risk be diversified away by investing in both Wynn Resorts and Melco International 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 Wynn Resorts and Melco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wynn Resorts Limited and Melco International Development, you can compare the effects of market volatilities on Wynn Resorts and Melco International 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 Wynn Resorts with a short position of Melco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wynn Resorts and Melco International.
Diversification Opportunities for Wynn Resorts and Melco International
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wynn and Melco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wynn Resorts Limited and Melco International Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco International and Wynn Resorts 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 Wynn Resorts Limited are associated (or correlated) with Melco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco International has no effect on the direction of Wynn Resorts i.e., Wynn Resorts and Melco International go up and down completely randomly.
Pair Corralation between Wynn Resorts and Melco International
Given the investment horizon of 90 days Wynn Resorts Limited is expected to under-perform the Melco International. In addition to that, Wynn Resorts is 1.09 times more volatile than Melco International Development. It trades about -0.09 of its total potential returns per unit of risk. Melco International Development is currently generating about -0.08 per unit of volatility. If you would invest 64.00 in Melco International Development on August 30, 2024 and sell it today you would lose (4.00) from holding Melco International Development or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wynn Resorts Limited vs. Melco International Developmen
Performance |
| Timeline |
| Wynn Resorts Limited |
| Melco International |
Wynn Resorts and Melco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wynn Resorts and Melco International
The main advantage of trading using opposite Wynn Resorts and Melco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wynn Resorts position performs unexpectedly, Melco International 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 International will offset losses from the drop in Melco International's long position.| Wynn Resorts vs. MGM Resorts International | Wynn Resorts vs. Caesars Entertainment | Wynn Resorts vs. Melco Resorts Entertainment | Wynn Resorts vs. Penn National Gaming |
| Melco International vs. Las Vegas Sands | Melco International vs. MGM Resorts International | Melco International vs. Caesars Entertainment | Melco International vs. Wynn Resorts Limited |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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