Correlation Between Red Rock and Las Vegas

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

Diversification Opportunities for Red Rock and Las Vegas

0.61

Correlation Coefficient

Red Rock  Las Vegas

Poor diversification

The 3 months correlation between Red and Las is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands 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 Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of Red Rock i.e., Red Rock and Las Vegas go up and down completely randomly.

Pair Corralation between Red Rock and Las Vegas

Considering the 90-day investment horizon Red Rock Resorts is expected to generate 0.92 times more return on investment than Las Vegas. However, Red Rock Resorts is 1.08 times less risky than Las Vegas. It trades about -0.04 of its potential returns per unit of risk. Las Vegas Sands is currently generating about -0.16 per unit of risk. If you would invest  4,484  in Red Rock Resorts on January 14, 2025 and sell it today you would lose (435.00) from holding Red Rock Resorts or give up 9.7% 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.  Las Vegas Sands

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 latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Las Vegas Sands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Las Vegas Sands 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 comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Red Rock and Las Vegas

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

The idea behind Red Rock Resorts and Las Vegas Sands 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.