Correlation Between MGM Resorts and Lowes Companies

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

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

Diversification Opportunities for MGM Resorts and Lowes Companies

0.23

Correlation Coefficient

MGM Resorts  Lowes Companies

Modest diversification

The 3 months correlation between MGM and Lowes is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and MGM 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 MGM Resorts International are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of MGM Resorts i.e., MGM Resorts and Lowes Companies go up and down completely randomly.

Pair Corralation between MGM Resorts and Lowes Companies

Considering the 90-day investment horizon MGM Resorts is expected to generate 1.14 times less return on investment than Lowes Companies. In addition to that, MGM Resorts is 1.43 times more volatile than Lowes Companies. It trades about 0.02 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.03 per unit of volatility. If you would invest  18,446  in Lowes Companies on January 26, 2024 and sell it today you would earn a total of  4,583  from holding Lowes Companies or generate 24.85% return on investment over 90 days.

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

MGM Resorts International  vs.  Lowes Companies

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 current stock price disarray, may contribute to short-term losses for the investors.

Lowes Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Lowes Companies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with MGM Resorts and Lowes Companies

The main advantage of trading using opposite MGM Resorts and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGM Resorts position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.

The idea behind MGM Resorts International and Lowes Companies 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.