Correlation Between Pool and RCI Hospitality
Can any of the company-specific risk be diversified away by investing in both Pool 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 Pool and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pool Corporation and RCI Hospitality Holdings, you can compare the effects of market volatilities on Pool 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 Pool with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pool and RCI Hospitality.
Diversification Opportunities for Pool and RCI Hospitality
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pool and RCI is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pool Corp. 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 Pool 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 Pool Corporation 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 Pool i.e., Pool and RCI Hospitality go up and down completely randomly.
Pair Corralation between Pool and RCI Hospitality
Given the investment horizon of 90 days Pool Corporation is expected to generate 0.88 times more return on investment than RCI Hospitality. However, Pool Corporation is 1.13 times less risky than RCI Hospitality. It trades about 0.12 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.18 per unit of risk. If you would invest 34,784 in Pool Corporation on October 24, 2024 and sell it today you would earn a total of 1,121 from holding Pool Corporation or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pool Corp. vs. RCI Hospitality Holdings
Performance |
| Timeline |
| Pool |
| RCI Hospitality Holdings |
Pool and RCI Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pool and RCI Hospitality
The main advantage of trading using opposite Pool and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pool 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 Pool Corporation 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. Chipotle Mexican Grill | RCI Hospitality vs. Yum Brands | RCI Hospitality vs. The Wendys Co | RCI Hospitality vs. Wingstop |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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