Correlation Between RCI Hospitality and CurrentC Power

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

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

Diversification Opportunities for RCI Hospitality and CurrentC Power

0.19

Correlation Coefficient

RCI Hospitality  CurrentC Power

Average diversification

The 3 months correlation between RCI and CurrentC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and CurrentC Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CurrentC Power and RCI Hospitality 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 RCI Hospitality Holdings are associated (or correlated) with CurrentC Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CurrentC Power has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and CurrentC Power go up and down completely randomly.

Pair Corralation between RCI Hospitality and CurrentC Power

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the CurrentC Power. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 83.31 times less risky than CurrentC Power. The stock trades about -0.24 of its potential returns per unit of risk. The CurrentC Power is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  18.00  in CurrentC Power on October 26, 2024 and sell it today you would earn a total of  8.00  from holding CurrentC Power or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

RCI Hospitality Holdings  vs.  CurrentC Power

RCI Hospitality Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 11 (%) 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.

CurrentC Power

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CurrentC Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, CurrentC Power showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RCI Hospitality and CurrentC Power

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

The idea behind RCI Hospitality Holdings and CurrentC Power 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.