Correlation Between Potbelly and Red Rock
Can any of the company-specific risk be diversified away by investing in both Potbelly 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 Potbelly and Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potbelly Co and Red Rock Resorts, you can compare the effects of market volatilities on Potbelly 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 Potbelly with a short position of Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potbelly and Red Rock.
Diversification Opportunities for Potbelly and Red Rock
Very good diversification
The 3 months correlation between Potbelly and Red is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Potbelly Co 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 Potbelly 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 Potbelly Co 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 Potbelly i.e., Potbelly and Red Rock go up and down completely randomly.
Pair Corralation between Potbelly and Red Rock
Given the investment horizon of 90 days Potbelly Co is expected to generate 2.02 times more return on investment than Red Rock. However, Potbelly is 2.02 times more volatile than Red Rock Resorts. It trades about 0.38 of its potential returns per unit of risk. Red Rock Resorts is currently generating about 0.18 per unit of risk. If you would invest 942.00 in Potbelly Co on November 1, 2024 and sell it today you would earn a total of 314.00 from holding Potbelly Co or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Potbelly Co vs. Red Rock Resorts
Performance |
| Timeline |
| Potbelly |
| Red Rock Resorts |
Potbelly and Red Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potbelly and Red Rock
The main advantage of trading using opposite Potbelly and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potbelly 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.The idea behind Potbelly Co and Red Rock 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.| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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