Correlation Between RCI Hospitality and Digi International

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

Diversification Opportunities for RCI Hospitality and Digi International

0.55

Correlation Coefficient

RCI Hospitality  Digi International

Very weak diversification

The 3 months correlation between RCI and Digi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Digi International go up and down completely randomly.

Pair Corralation between RCI Hospitality and Digi International

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Digi International. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.21 times less risky than Digi International. The stock trades about -0.02 of its potential returns per unit of risk. The Digi International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,353  in Digi International on October 5, 2024 and sell it today you would lose (359.00) from holding Digi International or give up 10.71% of portfolio value over 90 days.

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

RCI Hospitality Holdings  vs.  Digi International

RCI Hospitality Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 17 (%) 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.

Digi International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RCI Hospitality and Digi International

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

The idea behind RCI Hospitality Holdings and Digi International 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..