Correlation Between RCI Hospitality and American Hotel
Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and American Hotel 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 RCI Hospitality and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCI Hospitality Holdings and American Hotel Income, you can compare the effects of market volatilities on RCI Hospitality and American Hotel 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 RCI Hospitality with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and American Hotel.
Diversification Opportunities for RCI Hospitality and American Hotel
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RCI and American is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and RCI Hospitality 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 RCI Hospitality Holdings are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and American Hotel go up and down completely randomly.
Pair Corralation between RCI Hospitality and American Hotel
Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 0.41 times more return on investment than American Hotel. However, RCI Hospitality Holdings is 2.46 times less risky than American Hotel. It trades about -0.02 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.05 per unit of risk. If you would invest 6,569 in RCI Hospitality Holdings on September 12, 2024 and sell it today you would lose (1,360) from holding RCI Hospitality Holdings or give up 20.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.37% |
| Values | Daily Returns |
RCI Hospitality Holdings vs. American Hotel Income
Performance |
| Timeline |
| RCI Hospitality Holdings |
| American Hotel Income |
RCI Hospitality and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCI Hospitality and American Hotel
The main advantage of trading using opposite RCI Hospitality and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| RCI Hospitality vs. Brinker International | RCI Hospitality vs. Bloomin Brands | RCI Hospitality vs. BJs Restaurants | RCI Hospitality vs. Dennys Corp |
| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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