Correlation Between Lithium Americas and RCI Hospitality

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

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

Diversification Opportunities for Lithium Americas and RCI Hospitality

-0.81

Correlation Coefficient

Lithium Americas  RCI Hospitality

Pay attention - limited upside

The 3 months correlation between Lithium and RCI is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp 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 Lithium Americas 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 Lithium Americas Corp 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 Lithium Americas i.e., Lithium Americas and RCI Hospitality go up and down completely randomly.

Pair Corralation between Lithium Americas and RCI Hospitality

Given the investment horizon of 90 days Lithium Americas Corp is expected to under-perform the RCI Hospitality. In addition to that, Lithium Americas is 1.75 times more volatile than RCI Hospitality Holdings. It trades about -0.03 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.03 per unit of volatility. If you would invest  9,088  in RCI Hospitality Holdings on October 10, 2024 and sell it today you would lose (3,356) from holding RCI Hospitality Holdings or give up 36.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Lithium Americas Corp  vs.  RCI Hospitality Holdings

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lithium Americas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

RCI Hospitality Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 17 (%) 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.

Pair Trading with Lithium Americas and RCI Hospitality

The main advantage of trading using opposite Lithium Americas and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas 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 Lithium Americas Corp 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.