Correlation Between Red Rock and Vail Resorts

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

Diversification Opportunities for Red Rock and Vail Resorts

-0.34

Correlation Coefficient

Red Rock  Vail Resorts

Very good diversification

The 3 months correlation between Red and Vail is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Red Rock i.e., Red Rock and Vail Resorts go up and down completely randomly.

Pair Corralation between Red Rock and Vail Resorts

Considering the 90-day investment horizon Red Rock Resorts is expected to generate 0.92 times more return on investment than Vail Resorts. However, Red Rock Resorts is 1.09 times less risky than Vail Resorts. It trades about -0.02 of its potential returns per unit of risk. Vail Resorts is currently generating about -0.13 per unit of risk. If you would invest  4,620  in Red Rock Resorts on December 26, 2024 and sell it today you would lose (156.00) from holding Red Rock Resorts or give up 3.38% of portfolio value over 90 days.

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

Red Rock Resorts  vs.  Vail Resorts

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.

Vail Resorts

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic 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 Vail Resorts

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

The idea behind Red Rock Resorts and Vail 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.