Correlation Between RCI Hospitality and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on RCI Hospitality and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and Iridium Communications.
Diversification Opportunities for RCI Hospitality and Iridium Communications
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between RCI and Iridium is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Iridium Communications go up and down completely randomly.
Pair Corralation between RCI Hospitality and Iridium Communications
Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.04 times more return on investment than Iridium Communications. However, RCI Hospitality is 1.04 times more volatile than Iridium Communications. It trades about 0.05 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.03 per unit of risk. If you would invest 4,477 in RCI Hospitality Holdings on September 3, 2024 and sell it today you would earn a total of 606.00 from holding RCI Hospitality Holdings or generate 13.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCI Hospitality Holdings vs. Iridium Communications
Performance |
| Timeline |
| RCI Hospitality Holdings |
| Iridium Communications |
RCI Hospitality and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCI Hospitality and Iridium Communications
The main advantage of trading using opposite RCI Hospitality and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| RCI Hospitality vs. Brinker International | RCI Hospitality vs. Bloomin Brands | RCI Hospitality vs. BJs Restaurants | RCI Hospitality vs. Dennys Corp |
| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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