Correlation Between RCI Hospitality and ArcelorMittal

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

Diversification Opportunities for RCI Hospitality and ArcelorMittal

0.37

Correlation Coefficient

RCI Hospitality  ArcelorMittal

Weak diversification

The 3 months correlation between RCI and ArcelorMittal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and ArcelorMittal go up and down completely randomly.

Pair Corralation between RCI Hospitality and ArcelorMittal

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.04 times more return on investment than ArcelorMittal. However, RCI Hospitality is 1.04 times more volatile than ArcelorMittal SA ADR. It trades about 0.11 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.06 per unit of risk. If you would invest  4,566  in RCI Hospitality Holdings on September 17, 2024 and sell it today you would earn a total of  643.00  from holding RCI Hospitality Holdings or generate 14.08% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  ArcelorMittal SA ADR

RCI Hospitality Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 8 (%) 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.

ArcelorMittal SA ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RCI Hospitality and ArcelorMittal

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

The idea behind RCI Hospitality Holdings and ArcelorMittal SA ADR 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.