Correlation Between STMicroelectronics and MGM Resorts

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

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

Diversification Opportunities for STMicroelectronics and MGM Resorts

0.76

Correlation Coefficient

STMicroelectronics  MGM Resorts

Poor diversification

The 3 months correlation between STMicroelectronics and MGM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV 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 STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and MGM Resorts go up and down completely randomly.

Pair Corralation between STMicroelectronics and MGM Resorts

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.26 times more return on investment than MGM Resorts. However, STMicroelectronics is 1.26 times more volatile than MGM Resorts International. It trades about 0.24 of its potential returns per unit of risk. MGM Resorts International is currently generating about 0.12 per unit of risk. If you would invest  1,899  in STMicroelectronics NV on April 23, 2025 and sell it today you would earn a total of  939.00  from holding STMicroelectronics NV or generate 49.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

STMicroelectronics NV  vs.  MGM Resorts International

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

MGM Resorts International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MGM Resorts International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MGM Resorts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and MGM Resorts

The main advantage of trading using opposite STMicroelectronics and MGM Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.