Correlation Between RCI Hospitality and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals, you can compare the effects of market volatilities on RCI Hospitality and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and Cumberland Pharmaceuticals.
Diversification Opportunities for RCI Hospitality and Cumberland Pharmaceuticals
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RCI and Cumberland is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between RCI Hospitality and Cumberland Pharmaceuticals
Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 0.49 times more return on investment than Cumberland Pharmaceuticals. However, RCI Hospitality Holdings is 2.04 times less risky than Cumberland Pharmaceuticals. It trades about 0.26 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about 0.1 per unit of risk. If you would invest 4,460 in RCI Hospitality Holdings on August 30, 2024 and sell it today you would earn a total of 744.00 from holding RCI Hospitality Holdings or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCI Hospitality Holdings vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
| RCI Hospitality Holdings |
| Cumberland Pharmaceuticals |
RCI Hospitality and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCI Hospitality and Cumberland Pharmaceuticals
The main advantage of trading using opposite RCI Hospitality and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' long position.| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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