Correlation Between Boyd Gaming and MGM Resorts

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

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

Diversification Opportunities for Boyd Gaming and MGM Resorts

0.78

Correlation Coefficient

Boyd Gaming  MGM Resorts

Poor diversification

The 3 months correlation between Boyd and MGM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming i.e., Boyd Gaming and MGM Resorts go up and down completely randomly.

Pair Corralation between Boyd Gaming and MGM Resorts

Considering the 90-day investment horizon Boyd Gaming is expected to generate 0.69 times more return on investment than MGM Resorts. However, Boyd Gaming is 1.44 times less risky than MGM Resorts. It trades about -0.04 of its potential returns per unit of risk. MGM Resorts International is currently generating about -0.13 per unit of risk. If you would invest  6,372  in Boyd Gaming on January 20, 2024 and sell it today you would lose (79.00) from holding Boyd Gaming or give up 1.24% of portfolio value over 90 days.

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

Boyd Gaming  vs.  MGM Resorts International

Boyd Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Boyd Gaming is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Boyd Gaming and MGM Resorts

The main advantage of trading using opposite Boyd Gaming and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming 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 Boyd Gaming 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.