Correlation Between RCI Hospitality and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on RCI Hospitality and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and MGP Ingredients.
Diversification Opportunities for RCI Hospitality and MGP Ingredients
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between RCI and MGP is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and MGP Ingredients go up and down completely randomly.
Pair Corralation between RCI Hospitality and MGP Ingredients
Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to generate 0.92 times more return on investment than MGP Ingredients. However, RCI Hospitality Holdings is 1.08 times less risky than MGP Ingredients. It trades about -0.03 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.07 per unit of risk. If you would invest 7,081 in RCI Hospitality Holdings on December 12, 2024 and sell it today you would lose (2,766) from holding RCI Hospitality Holdings or give up 39.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCI Hospitality Holdings vs. MGP Ingredients
Performance |
| Timeline |
| RCI Hospitality Holdings |
| MGP Ingredients |
RCI Hospitality and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCI Hospitality and MGP Ingredients
The main advantage of trading using opposite RCI Hospitality and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| RCI Hospitality vs. Fast Retailing Co | ||
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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