Correlation Between Xponential Fitness and Melco Resorts

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

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

Diversification Opportunities for Xponential Fitness and Melco Resorts

-0.75

Correlation Coefficient

Xponential Fitness  Melco Resorts

Pay attention - limited upside

The 3 months correlation between Xponential and Melco is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert and Xponential Fitness 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 Xponential Fitness are associated (or correlated) with Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Xponential Fitness i.e., Xponential Fitness and Melco Resorts go up and down completely randomly.

Pair Corralation between Xponential Fitness and Melco Resorts

Given the investment horizon of 90 days Xponential Fitness is expected to generate 4.04 times less return on investment than Melco Resorts. But when comparing it to its historical volatility, Xponential Fitness is 2.85 times less risky than Melco Resorts. It trades about 0.14 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  858.00  in Melco Resorts Entertainment on March 18, 2024 and sell it today you would earn a total of  428.00  from holding Melco Resorts Entertainment or generate 49.88% return on investment over 90 days.

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

Xponential Fitness  vs.  Melco Resorts Entertainment

Xponential Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xponential Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Melco Resorts Entert

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melco Resorts Entertainment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Melco Resorts displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xponential Fitness and Melco Resorts

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

The idea behind Xponential Fitness and Melco Resorts Entertainment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..