Correlation Between Red Rock and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Red Rock and Melco 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 Melco 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 Melco Resorts Entertainment, you can compare the effects of market volatilities on Red Rock and Melco 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 Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Rock and Melco Resorts.
Diversification Opportunities for Red Rock and Melco Resorts
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and Melco is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Red Rock Resorts and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Red Rock i.e., Red Rock and Melco Resorts go up and down completely randomly.
Pair Corralation between Red Rock and Melco Resorts
Considering the 90-day investment horizon Red Rock Resorts is expected to under-perform the Melco Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Red Rock Resorts is 1.73 times less risky than Melco Resorts. The stock trades about -0.08 of its potential returns per unit of risk. The Melco Resorts Entertainment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 508.00 in Melco Resorts Entertainment on August 28, 2024 and sell it today you would earn a total of 99.00 from holding Melco Resorts Entertainment or generate 19.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Rock Resorts vs. Melco Resorts Entertainment
Performance |
| Timeline |
| Red Rock Resorts |
| Melco Resorts Entert |
Red Rock and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Rock and Melco Resorts
The main advantage of trading using opposite Red Rock and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Rock position performs unexpectedly, Melco 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 Melco Resorts will offset losses from the drop in Melco Resorts' long position.| Red Rock vs. Golden Entertainment | Red Rock vs. Century Casinos | Red Rock vs. Studio City International | Red Rock vs. Ballys Corp |
| Melco Resorts vs. Wynn Resorts Limited | Melco Resorts vs. MGM Resorts International | Melco Resorts vs. Caesars Entertainment | Melco Resorts vs. Penn National Gaming |
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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