Correlation Between Las Vegas and Red Rock

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

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

Diversification Opportunities for Las Vegas and Red Rock

-0.07

Correlation Coefficient

Las Vegas  Red Rock

Good diversification

The 3 months correlation between Las and Red is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands 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 Las Vegas 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 Las Vegas Sands 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 Las Vegas i.e., Las Vegas and Red Rock go up and down completely randomly.

Pair Corralation between Las Vegas and Red Rock

Considering the 90-day investment horizon Las Vegas is expected to generate 20.72 times less return on investment than Red Rock. But when comparing it to its historical volatility, Las Vegas Sands is 1.1 times less risky than Red Rock. It trades about 0.0 of its potential returns per unit of risk. Red Rock Resorts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,108  in Red Rock Resorts on October 4, 2024 and sell it today you would earn a total of  357.00  from holding Red Rock Resorts or generate 8.69% return on investment over 90 days.

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

Las Vegas Sands  vs.  Red Rock Resorts

Las Vegas Sands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Las Vegas Sands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Las Vegas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Red Rock Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Rock Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Las Vegas and Red Rock

The main advantage of trading using opposite Las Vegas and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Las Vegas 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 Las Vegas Sands 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.