Correlation Between Vail Resorts and MGM Resorts

Can any of the company-specific risk be diversified away by investing in both Vail Resorts 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 Vail Resorts and MGM Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vail Resorts and MGM Resorts International, you can compare the effects of market volatilities on Vail Resorts 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 Vail Resorts with a short position of MGM Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vail Resorts and MGM Resorts.

Diversification Opportunities for Vail Resorts and MGM Resorts

0.26

Correlation Coefficient

Vail Resorts  MGM Resorts

Modest diversification

The 3 months correlation between Vail and MGM is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts 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 Vail 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 Vail Resorts 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 Vail Resorts i.e., Vail Resorts and MGM Resorts go up and down completely randomly.

Pair Corralation between Vail Resorts and MGM Resorts

Considering the 90-day investment horizon Vail Resorts is expected to under-perform the MGM Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Vail Resorts is 1.33 times less risky than MGM Resorts. The stock trades about 0.0 of its potential returns per unit of risk. The MGM Resorts International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,506  in MGM Resorts International on January 31, 2024 and sell it today you would earn a total of  655.00  from holding MGM Resorts International or generate 18.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vail Resorts  vs.  MGM Resorts International

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

MGM Resorts International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM Resorts International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MGM Resorts is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vail Resorts and MGM Resorts

The main advantage of trading using opposite Vail Resorts and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vail Resorts 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.

The idea behind Vail Resorts and MGM Resorts International 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.