Correlation Between RB Global and Target Hospitality

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

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

Diversification Opportunities for RB Global and Target Hospitality

0.22

Correlation Coefficient

RB Global  Target Hospitality

Modest diversification

The 3 months correlation between RBA and Target is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding RB Global and Target Hospitality Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Hospitality Corp and RB Global 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 RB Global are associated (or correlated) with Target Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Hospitality Corp has no effect on the direction of RB Global i.e., RB Global and Target Hospitality go up and down completely randomly.

Pair Corralation between RB Global and Target Hospitality

Considering the 90-day investment horizon RB Global is expected to under-perform the Target Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, RB Global is 2.98 times less risky than Target Hospitality. The stock trades about -0.25 of its potential returns per unit of risk. The Target Hospitality Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  842.00  in Target Hospitality Corp on October 25, 2024 and sell it today you would earn a total of  194.50  from holding Target Hospitality Corp or generate 23.1% return on investment over 90 days.

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

RB Global  vs.  Target Hospitality Corp

RB Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, RB Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Target Hospitality Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target Hospitality Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Target Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RB Global and Target Hospitality

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

The idea behind RB Global and Target Hospitality Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..