Correlation Between Red Rock and Studio City

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

Diversification Opportunities for Red Rock and Studio City

-0.13

Correlation Coefficient

Red Rock  Studio City

Good diversification

The 3 months correlation between Red and Studio is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Studio City International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Studio City International 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 Studio City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Studio City International has no effect on the direction of Red Rock i.e., Red Rock and Studio City go up and down completely randomly.

Pair Corralation between Red Rock and Studio City

Considering the 90-day investment horizon Red Rock Resorts is expected to generate 0.33 times more return on investment than Studio City. However, Red Rock Resorts is 3.01 times less risky than Studio City. It trades about 0.01 of its potential returns per unit of risk. Studio City International is currently generating about -0.17 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Red Rock Resorts  vs.  Studio City International

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.

Studio City International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Studio City International 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 rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Red Rock and Studio City

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

The idea behind Red Rock Resorts and Studio City International 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.