Correlation Between Hafnia and RCI Hospitality

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

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

Diversification Opportunities for Hafnia and RCI Hospitality

0.74

Correlation Coefficient

Hafnia  RCI Hospitality

Poor diversification

The 3 months correlation between Hafnia and RCI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hafnia Limited 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 Hafnia 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 Hafnia Limited 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 Hafnia i.e., Hafnia and RCI Hospitality go up and down completely randomly.

Pair Corralation between Hafnia and RCI Hospitality

Given the investment horizon of 90 days Hafnia Limited is expected to generate 1.87 times more return on investment than RCI Hospitality. However, Hafnia is 1.87 times more volatile than RCI Hospitality Holdings. It trades about -0.05 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.2 per unit of risk. If you would invest  507.00  in Hafnia Limited on December 19, 2024 and sell it today you would lose (64.00) from holding Hafnia Limited or give up 12.62% of portfolio value over 90 days.

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

Hafnia Limited  vs.  RCI Hospitality Holdings

Hafnia Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hafnia and RCI Hospitality

The main advantage of trading using opposite Hafnia and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hafnia 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 Hafnia Limited 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.