Correlation Between Papa Johns and RCI Hospitality

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Can any of the company-specific risk be diversified away by investing in both Papa Johns 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 Papa Johns and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Papa Johns International and RCI Hospitality Holdings, you can compare the effects of market volatilities on Papa Johns 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 Papa Johns with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papa Johns and RCI Hospitality.

Diversification Opportunities for Papa Johns and RCI Hospitality

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Papa and RCI is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International 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 Papa Johns 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 Papa Johns International 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 Papa Johns i.e., Papa Johns and RCI Hospitality go up and down completely randomly.

Pair Corralation between Papa Johns and RCI Hospitality

Given the investment horizon of 90 days Papa Johns International is expected to generate 1.89 times more return on investment than RCI Hospitality. However, Papa Johns is 1.89 times more volatile than RCI Hospitality Holdings. It trades about -0.15 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.32 per unit of risk. If you would invest  3,909  in Papa Johns International on October 22, 2024 and sell it today you would lose (308.00) from holding Papa Johns International or give up 7.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Papa Johns International  vs.  RCI Hospitality Holdings

 Performance 
       Timeline  
Papa Johns International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
RCI Hospitality Holdings 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 10 (%) 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.

Papa Johns and RCI Hospitality Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Papa Johns and RCI Hospitality

The main advantage of trading using opposite Papa Johns and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papa Johns 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 Papa Johns International 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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