Correlation Between Vail Resorts and Red Rock

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

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

Diversification Opportunities for Vail Resorts and Red Rock

0.19

Correlation Coefficient

Vail Resorts  Red Rock

Average diversification

The 3 months correlation between Vail and Red is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vail Resorts 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 Vail 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 Vail Resorts 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 Vail Resorts i.e., Vail Resorts and Red Rock go up and down completely randomly.

Pair Corralation between Vail Resorts and Red Rock

Considering the 90-day investment horizon Vail Resorts is expected to generate 0.83 times more return on investment than Red Rock. However, Vail Resorts is 1.2 times less risky than Red Rock. It trades about 0.17 of its potential returns per unit of risk. Red Rock Resorts is currently generating about -0.1 per unit of risk. If you would invest  16,884  in Vail Resorts on August 31, 2024 and sell it today you would earn a total of  1,342  from holding Vail Resorts or generate 7.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Vail Resorts  vs.  Red Rock Resorts

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vail Resorts is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Vail Resorts and Red Rock

The main advantage of trading using opposite Vail Resorts and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vail Resorts 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 Vail Resorts 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.