Correlation Between RCI Hospitality and Cannae Holdings

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

Diversification Opportunities for RCI Hospitality and Cannae Holdings

-0.18

Correlation Coefficient

RCI Hospitality  Cannae Holdings

Good diversification

The 3 months correlation between RCI and Cannae is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Cannae Holdings go up and down completely randomly.

Pair Corralation between RCI Hospitality and Cannae Holdings

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.8 times more return on investment than Cannae Holdings. However, RCI Hospitality is 1.8 times more volatile than Cannae Holdings. It trades about 0.0 of its potential returns per unit of risk. Cannae Holdings is currently generating about -0.09 per unit of risk. If you would invest  5,076  in RCI Hospitality Holdings on December 1, 2024 and sell it today you would lose (99.00) from holding RCI Hospitality Holdings or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Cannae Holdings

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 quite persistent fundamental indicators, RCI Hospitality is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Cannae Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cannae Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with RCI Hospitality and Cannae Holdings

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

The idea behind RCI Hospitality Holdings and Cannae 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.