Correlation Between Red Rock and Hilton Grand

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

Diversification Opportunities for Red Rock and Hilton Grand

0.84

Correlation Coefficient

Red Rock  Hilton Grand

Very poor diversification

The 3 months correlation between Red and Hilton is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Hilton Grand Vacations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Grand Vacations 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 Hilton Grand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Grand Vacations has no effect on the direction of Red Rock i.e., Red Rock and Hilton Grand go up and down completely randomly.

Pair Corralation between Red Rock and Hilton Grand

Considering the 90-day investment horizon Red Rock is expected to generate 2.38 times less return on investment than Hilton Grand. But when comparing it to its historical volatility, Red Rock Resorts is 1.02 times less risky than Hilton Grand. It trades about 0.0 of its potential returns per unit of risk. Hilton Grand Vacations is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,239  in Hilton Grand Vacations on November 29, 2024 and sell it today you would earn a total of  11.00  from holding Hilton Grand Vacations or generate 0.26% return on investment over 90 days.

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

Red Rock Resorts  vs.  Hilton Grand Vacations

Red Rock Resorts

Risk-Adjusted Performance

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.

Hilton Grand Vacations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Grand Vacations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Hilton Grand is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Red Rock and Hilton Grand

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

The idea behind Red Rock Resorts and Hilton Grand Vacations 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.