Correlation Between RCI Hospitality and Pool

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Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and Pool 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 Pool 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 Pool Corporation, you can compare the effects of market volatilities on RCI Hospitality and Pool 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 Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and Pool.

Diversification Opportunities for RCI Hospitality and Pool

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between RCI and Pool is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Pool go up and down completely randomly.

Pair Corralation between RCI Hospitality and Pool

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.32 times more return on investment than Pool. However, RCI Hospitality is 1.32 times more volatile than Pool Corporation. It trades about 0.0 of its potential returns per unit of risk. Pool Corporation is currently generating about -0.01 per unit of risk. If you would invest  6,046  in RCI Hospitality Holdings on November 4, 2024 and sell it today you would lose (492.00) from holding RCI Hospitality Holdings or give up 8.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

RCI Hospitality Holdings  vs.  Pool Corp.

 Performance 
       Timeline  
RCI Hospitality Holdings 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.
Pool 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

RCI Hospitality and Pool Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RCI Hospitality and Pool

The main advantage of trading using opposite RCI Hospitality and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, Pool 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 Pool will offset losses from the drop in Pool's long position.
The idea behind RCI Hospitality Holdings and Pool Corporation 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.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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