Correlation Between Lavoro Limited and RCI Hospitality

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

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

Diversification Opportunities for Lavoro Limited and RCI Hospitality

0.35

Correlation Coefficient

Lavoro Limited  RCI Hospitality

Weak diversification

The 3 months correlation between Lavoro and RCI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Class 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 Lavoro Limited 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 Lavoro Limited Class 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 Lavoro Limited i.e., Lavoro Limited and RCI Hospitality go up and down completely randomly.

Pair Corralation between Lavoro Limited and RCI Hospitality

Given the investment horizon of 90 days Lavoro Limited Class is expected to under-perform the RCI Hospitality. In addition to that, Lavoro Limited is 2.99 times more volatile than RCI Hospitality Holdings. It trades about -0.06 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.17 per unit of volatility. If you would invest  5,732  in RCI Hospitality Holdings on December 24, 2024 and sell it today you would lose (1,050) from holding RCI Hospitality Holdings or give up 18.32% of portfolio value over 90 days.

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

Lavoro Limited Class  vs.  RCI Hospitality Holdings

Lavoro Limited Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lavoro Limited Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing 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 Lavoro Limited and RCI Hospitality

The main advantage of trading using opposite Lavoro Limited and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lavoro Limited 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 Lavoro Limited Class 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.