Correlation Between RCI Hospitality and Douglas Emmett

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

Diversification Opportunities for RCI Hospitality and Douglas Emmett

0.49

Correlation Coefficient

RCI Hospitality  Douglas Emmett

Very weak diversification

The 3 months correlation between RCI and Douglas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Douglas Emmett go up and down completely randomly.

Pair Corralation between RCI Hospitality and Douglas Emmett

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Douglas Emmett. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.17 times less risky than Douglas Emmett. The stock trades about -0.03 of its potential returns per unit of risk. The Douglas Emmett is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,378  in Douglas Emmett on October 11, 2024 and sell it today you would earn a total of  312.00  from holding Douglas Emmett or generate 22.64% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  Douglas Emmett

RCI Hospitality Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 16 (%) 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.

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RCI Hospitality and Douglas Emmett

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

The idea behind RCI Hospitality Holdings and Douglas Emmett 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.