Correlation Between NYSE Composite and Red Rock
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Red Rock Resorts, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Red Rock.
Diversification Opportunities for NYSE Composite and Red Rock
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Red is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Red Rock go up and down completely randomly.
Pair Corralation between NYSE Composite and Red Rock
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.49 times more return on investment than Red Rock. However, NYSE Composite is 2.04 times less risky than Red Rock. It trades about -0.33 of its potential returns per unit of risk. Red Rock Resorts is currently generating about -0.5 per unit of risk. If you would invest 2,006,231 in NYSE Composite on December 14, 2024 and sell it today you would lose (118,678) from holding NYSE Composite or give up 5.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Red Rock Resorts
Performance |
| Timeline |
NYSE Composite and Red Rock Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Red Rock Resorts
Pair trading matchups for Red Rock
Pair Trading with NYSE Composite and Red Rock
The main advantage of trading using opposite NYSE Composite and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. ServiceNow | ||
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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