Correlation Between Banyan Tree and Red Rock
Can any of the company-specific risk be diversified away by investing in both Banyan Tree and Red Rock 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 Banyan Tree and Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banyan Tree Holdings and Red Rock Resorts, you can compare the effects of market volatilities on Banyan Tree and Red Rock 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 Banyan Tree with a short position of Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banyan Tree and Red Rock.
Diversification Opportunities for Banyan Tree and Red Rock
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Banyan and Red is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Banyan Tree Holdings and Red Rock Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Rock Resorts and Banyan Tree 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 Banyan Tree Holdings are associated (or correlated) with Red Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Rock Resorts has no effect on the direction of Banyan Tree i.e., Banyan Tree and Red Rock go up and down completely randomly.
Pair Corralation between Banyan Tree and Red Rock
Assuming the 90 days horizon Banyan Tree Holdings is expected to generate 23.31 times more return on investment than Red Rock. However, Banyan Tree is 23.31 times more volatile than Red Rock Resorts. It trades about 0.05 of its potential returns per unit of risk. Red Rock Resorts is currently generating about 0.03 per unit of risk. If you would invest 20.00 in Banyan Tree Holdings on August 25, 2024 and sell it today you would lose (19.92) from holding Banyan Tree Holdings or give up 99.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Banyan Tree Holdings vs. Red Rock Resorts
Performance |
| Timeline |
| Banyan Tree Holdings |
| Red Rock Resorts |
Banyan Tree and Red Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banyan Tree and Red Rock
The main advantage of trading using opposite Banyan Tree and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banyan Tree position performs unexpectedly, Red Rock 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 Red Rock will offset losses from the drop in Red Rock's long position.| Banyan Tree vs. SJM Holdings Ltd | Banyan Tree vs. Studio City International | Banyan Tree vs. Monarch Casino Resort | Banyan Tree vs. Playa Hotels Resorts |
| Red Rock vs. Golden Entertainment | Red Rock vs. Century Casinos | Red Rock vs. Studio City International | Red Rock vs. Ballys Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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