Correlation Between Red Rock and Century Casinos

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

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

Diversification Opportunities for Red Rock and Century Casinos

0.29

Correlation Coefficient

Red Rock  Century Casinos

Modest diversification

The 3 months correlation between Red and Century is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Century Casinos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Casinos and Red Rock 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 Red Rock Resorts are associated (or correlated) with Century Casinos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Casinos has no effect on the direction of Red Rock i.e., Red Rock and Century Casinos go up and down completely randomly.

Pair Corralation between Red Rock and Century Casinos

Considering the 90-day investment horizon Red Rock Resorts is expected to generate 0.53 times more return on investment than Century Casinos. However, Red Rock Resorts is 1.9 times less risky than Century Casinos. It trades about 0.01 of its potential returns per unit of risk. Century Casinos is currently generating about -0.2 per unit of risk. If you would invest  4,984  in Red Rock Resorts on November 29, 2024 and sell it today you would earn a total of  32.00  from holding Red Rock Resorts or generate 0.64% return on investment over 90 days.

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

Red Rock Resorts  vs.  Century Casinos

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.

Century Casinos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Century Casinos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Red Rock and Century Casinos

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

The idea behind Red Rock Resorts and Century Casinos 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 Managers module to screen money managers from public funds and ETFs managed around the world.