Correlation Between Melco Resorts and Red Rock
Can any of the company-specific risk be diversified away by investing in both Melco Resorts 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 Melco Resorts and Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Melco Resorts Entertainment and Red Rock Resorts, you can compare the effects of market volatilities on Melco Resorts 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 Melco Resorts with a short position of Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melco Resorts and Red Rock.
Diversification Opportunities for Melco Resorts and Red Rock
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Melco and Red is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Melco Resorts Entertainment 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 Melco Resorts 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 Melco Resorts Entertainment 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 Melco Resorts i.e., Melco Resorts and Red Rock go up and down completely randomly.
Pair Corralation between Melco Resorts and Red Rock
Given the investment horizon of 90 days Melco Resorts Entertainment is expected to under-perform the Red Rock. But the stock apears to be less risky and, when comparing its historical volatility, Melco Resorts Entertainment is 1.22 times less risky than Red Rock. The stock trades about -0.03 of its potential returns per unit of risk. The Red Rock Resorts is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 4,347 in Red Rock Resorts on March 10, 2025 and sell it today you would earn a total of 657.00 from holding Red Rock Resorts or generate 15.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Melco Resorts Entertainment vs. Red Rock Resorts
Performance |
| Timeline |
| Melco Resorts Entert |
| Red Rock Resorts |
Melco Resorts and Red Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Melco Resorts and Red Rock
The main advantage of trading using opposite Melco Resorts and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melco Resorts 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.| Melco Resorts vs. Wynn Resorts Limited | Melco Resorts vs. MGM Resorts International | Melco Resorts vs. Caesars Entertainment | Melco Resorts vs. Penn National Gaming |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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