Correlation Between RCI Hospitality and Mamas Creations

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

Diversification Opportunities for RCI Hospitality and Mamas Creations

0.74

Correlation Coefficient

RCI Hospitality  Mamas Creations

Poor diversification

The 3 months correlation between RCI and Mamas is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Mamas Creations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mamas Creations 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 Mamas Creations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mamas Creations has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Mamas Creations go up and down completely randomly.

Pair Corralation between RCI Hospitality and Mamas Creations

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Mamas Creations. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.99 times less risky than Mamas Creations. The stock trades about -0.18 of its potential returns per unit of risk. The Mamas Creations is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  777.00  in Mamas Creations on December 18, 2024 and sell it today you would lose (133.00) from holding Mamas Creations or give up 17.12% of portfolio value over 90 days.

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

RCI Hospitality Holdings  vs.  Mamas Creations

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 uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mamas Creations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mamas Creations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RCI Hospitality and Mamas Creations

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

The idea behind RCI Hospitality Holdings and Mamas Creations 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.