Correlation Between MGM Resorts and Century Casinos

Can any of the company-specific risk be diversified away by investing in both MGM Resorts and Century Casinos 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 Century Casinos 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 Century Casinos, you can compare the effects of market volatilities on MGM Resorts and Century Casinos 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 Century Casinos. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGM Resorts and Century Casinos.

Diversification Opportunities for MGM Resorts and Century Casinos

-0.46

Correlation Coefficient

MGM Resorts  Century Casinos

Very good diversification

The 3 months correlation between MGM and Century is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding MGM Resorts International and Century Casinos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Casinos 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 Century Casinos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Casinos has no effect on the direction of MGM Resorts i.e., MGM Resorts and Century Casinos go up and down completely randomly.

Pair Corralation between MGM Resorts and Century Casinos

Considering the 90-day investment horizon MGM Resorts International is expected to under-perform the Century Casinos. But the stock apears to be less risky and, when comparing its historical volatility, MGM Resorts International is 1.98 times less risky than Century Casinos. The stock trades about -0.08 of its potential returns per unit of risk. The Century Casinos is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Century Casinos on September 30, 2024 and sell it today you would earn a total of  60.00  from holding Century Casinos or generate 23.44% return on investment over 90 days.

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

MGM Resorts International  vs.  Century Casinos

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Century Casinos

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Century Casinos are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Century Casinos showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGM Resorts and Century Casinos

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

The idea behind MGM Resorts International and Century Casinos 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.