Correlation Between Melco Resorts and Golden Entertainment

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

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

Diversification Opportunities for Melco Resorts and Golden Entertainment

0.8

Correlation Coefficient

Melco Resorts  Golden Entertainment

Very poor diversification

The 3 months correlation between Melco and Golden is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment and Melco 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 Melco Resorts Entertainment are associated (or correlated) with Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Melco Resorts i.e., Melco Resorts and Golden Entertainment go up and down completely randomly.

Pair Corralation between Melco Resorts and Golden Entertainment

Assuming the 90 days trading horizon Melco Resorts Entertainment is expected to generate 1.22 times more return on investment than Golden Entertainment. However, Melco Resorts is 1.22 times more volatile than Golden Entertainment. It trades about 0.36 of its potential returns per unit of risk. Golden Entertainment is currently generating about 0.07 per unit of risk. If you would invest  426.00  in Melco Resorts Entertainment on April 24, 2025 and sell it today you would earn a total of  344.00  from holding Melco Resorts Entertainment or generate 80.75% return on investment over 90 days.

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

Melco Resorts Entertainment  vs.  Golden Entertainment

Melco Resorts Entert

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Melco Resorts Entertainment are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Melco Resorts unveiled solid returns over the last few months and may actually be approaching a breakup point.

Golden Entertainment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Golden Entertainment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Melco Resorts and Golden Entertainment

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

The idea behind Melco Resorts Entertainment and Golden 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.