Correlation Between Boyd Gaming and RCI Hospitality

Can any of the company-specific risk be diversified away by investing in both Boyd Gaming and RCI Hospitality 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 Boyd Gaming and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boyd Gaming and RCI Hospitality Holdings, you can compare the effects of market volatilities on Boyd Gaming and RCI Hospitality 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 Boyd Gaming with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and RCI Hospitality.

Diversification Opportunities for Boyd Gaming and RCI Hospitality

-0.14

Correlation Coefficient

Boyd Gaming  RCI Hospitality

Good diversification

The 3 months correlation between Boyd and RCI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings and Boyd Gaming 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 Boyd Gaming are associated (or correlated) with RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and RCI Hospitality go up and down completely randomly.

Pair Corralation between Boyd Gaming and RCI Hospitality

Considering the 90-day investment horizon Boyd Gaming is expected to generate 0.91 times more return on investment than RCI Hospitality. However, Boyd Gaming is 1.1 times less risky than RCI Hospitality. It trades about -0.45 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.42 per unit of risk. If you would invest  7,768  in Boyd Gaming on December 10, 2024 and sell it today you would lose (1,134) from holding Boyd Gaming or give up 14.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Boyd Gaming  vs.  RCI Hospitality Holdings

Boyd Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RCI Hospitality Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCI Hospitality Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Boyd Gaming and RCI Hospitality

The main advantage of trading using opposite Boyd Gaming and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming position performs unexpectedly, RCI Hospitality 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 RCI Hospitality will offset losses from the drop in RCI Hospitality's long position.

The idea behind Boyd Gaming and RCI Hospitality Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.