Correlation Between Enersys and Red Rock

Can any of the company-specific risk be diversified away by investing in both Enersys 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 Enersys and Red Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enersys and Red Rock Resorts, you can compare the effects of market volatilities on Enersys 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 Enersys with a short position of Red Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enersys and Red Rock.

Diversification Opportunities for Enersys and Red Rock

-0.59

Correlation Coefficient

Enersys  Red Rock

Excellent diversification

The 3 months correlation between Enersys and Red is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Enersys 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 Enersys 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 Enersys 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 Enersys i.e., Enersys and Red Rock go up and down completely randomly.

Pair Corralation between Enersys and Red Rock

Considering the 90-day investment horizon Enersys is expected to generate 1.88 times less return on investment than Red Rock. In addition to that, Enersys is 1.04 times more volatile than Red Rock Resorts. It trades about 0.03 of its total potential returns per unit of risk. Red Rock Resorts is currently generating about 0.06 per unit of volatility. If you would invest  4,696  in Red Rock Resorts on January 25, 2024 and sell it today you would earn a total of  1,197  from holding Red Rock Resorts or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enersys  vs.  Red Rock Resorts

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Red Rock Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Rock Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Red Rock may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Enersys and Red Rock

The main advantage of trading using opposite Enersys and Red Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enersys 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 Enersys 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.