Correlation Between ServiceNow and RCI Hospitality
Can any of the company-specific risk be diversified away by investing in both ServiceNow and RCI Hospitality 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 ServiceNow and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and RCI Hospitality Holdings, you can compare the effects of market volatilities on ServiceNow and RCI Hospitality 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 ServiceNow with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and RCI Hospitality.
Diversification Opportunities for ServiceNow and RCI Hospitality
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ServiceNow and RCI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings and ServiceNow 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 ServiceNow are associated (or correlated) with RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of ServiceNow i.e., ServiceNow and RCI Hospitality go up and down completely randomly.
Pair Corralation between ServiceNow and RCI Hospitality
Considering the 90-day investment horizon ServiceNow is expected to generate 0.72 times more return on investment than RCI Hospitality. However, ServiceNow is 1.38 times less risky than RCI Hospitality. It trades about 0.22 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about 0.13 per unit of risk. If you would invest 83,586 in ServiceNow on September 3, 2024 and sell it today you would earn a total of 21,358 from holding ServiceNow or generate 25.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. RCI Hospitality Holdings
Performance |
| Timeline |
| ServiceNow |
| RCI Hospitality Holdings |
ServiceNow and RCI Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and RCI Hospitality
The main advantage of trading using opposite ServiceNow and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow position performs unexpectedly, RCI Hospitality 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 RCI Hospitality will offset losses from the drop in RCI Hospitality's long position.The idea behind ServiceNow and RCI Hospitality Holdings 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.| RCI Hospitality vs. Brinker International | RCI Hospitality vs. Bloomin Brands | RCI Hospitality vs. BJs Restaurants | RCI Hospitality vs. Dennys 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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