Correlation Between Red Rock and Golden Entertainment

Can any of the company-specific risk be diversified away by investing in both Red Rock and Golden Entertainment 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 Golden Entertainment 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 Golden Entertainment, you can compare the effects of market volatilities on Red Rock and Golden Entertainment 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 Golden Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Rock and Golden Entertainment.

Diversification Opportunities for Red Rock and Golden Entertainment

0.66

Correlation Coefficient

Red Rock  Golden Entertainment

Poor diversification

The 3 months correlation between Red and Golden is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Golden Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Entertainment 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 Golden Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Entertainment has no effect on the direction of Red Rock i.e., Red Rock and Golden Entertainment go up and down completely randomly.

Pair Corralation between Red Rock and Golden Entertainment

Considering the 90-day investment horizon Red Rock Resorts is expected to generate 1.0 times more return on investment than Golden Entertainment. However, Red Rock is 1.0 times more volatile than Golden Entertainment. It trades about -0.02 of its potential returns per unit of risk. Golden Entertainment is currently generating about -0.11 per unit of risk. If you would invest  4,590  in Red Rock Resorts on December 27, 2024 and sell it today you would lose (129.00) from holding Red Rock Resorts or give up 2.81% of portfolio value over 90 days.

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

Red Rock Resorts  vs.  Golden Entertainment

Red Rock Resorts

Risk-Adjusted Performance

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 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.

Golden Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Red Rock and Golden Entertainment

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

The idea behind Red Rock Resorts and Golden Entertainment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.