Correlation Between Everi Holdings and Red Rock

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

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

Diversification Opportunities for Everi Holdings and Red Rock

0.38

Correlation Coefficient

Everi Holdings  Red Rock

Weak diversification

The 3 months correlation between Everi and Red is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Everi Holdings and Red Rock Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Rock Resorts and Everi Holdings 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 Everi Holdings are associated (or correlated) with Red Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Rock Resorts has no effect on the direction of Everi Holdings i.e., Everi Holdings and Red Rock go up and down completely randomly.

Pair Corralation between Everi Holdings and Red Rock

Given the investment horizon of 90 days Everi Holdings is expected to generate 0.09 times more return on investment than Red Rock. However, Everi Holdings is 10.68 times less risky than Red Rock. It trades about 0.24 of its potential returns per unit of risk. Red Rock Resorts is currently generating about 0.01 per unit of risk. If you would invest  1,347  in Everi Holdings on November 29, 2024 and sell it today you would earn a total of  30.00  from holding Everi Holdings or generate 2.23% return on investment over 90 days.

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

Everi Holdings  vs.  Red Rock Resorts

Everi Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Everi Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Everi Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Red Rock Resorts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Rock Resorts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Red Rock is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Everi Holdings and Red Rock

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

The idea behind Everi Holdings and Red Rock Resorts 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.