Correlation Between RCI Hospitality and Brand Engagement

Can any of the company-specific risk be diversified away by investing in both RCI Hospitality and Brand Engagement 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 Brand Engagement 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 Brand Engagement Network, you can compare the effects of market volatilities on RCI Hospitality and Brand Engagement 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 Brand Engagement. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCI Hospitality and Brand Engagement.

Diversification Opportunities for RCI Hospitality and Brand Engagement

-0.2

Correlation Coefficient

RCI Hospitality  Brand Engagement

Good diversification

The 3 months correlation between RCI and Brand is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Brand Engagement Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brand Engagement Network 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 Brand Engagement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brand Engagement Network has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Brand Engagement go up and down completely randomly.

Pair Corralation between RCI Hospitality and Brand Engagement

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Brand Engagement. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 28.44 times less risky than Brand Engagement. The stock trades about -0.32 of its potential returns per unit of risk. The Brand Engagement Network is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1.89  in Brand Engagement Network on October 23, 2024 and sell it today you would earn a total of  3.11  from holding Brand Engagement Network or generate 164.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Brand Engagement Network

RCI Hospitality Holdings

Risk-Adjusted Performance

10 of 100

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.

Brand Engagement Network

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with RCI Hospitality and Brand Engagement

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

The idea behind RCI Hospitality Holdings and Brand Engagement Network 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.