Correlation Between RCI Hospitality and Nathans Famous

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

Diversification Opportunities for RCI Hospitality and Nathans Famous

-0.49

Correlation Coefficient

RCI Hospitality  Nathans Famous

Very good diversification

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

Pair Corralation between RCI Hospitality and Nathans Famous

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Nathans Famous. In addition to that, RCI Hospitality is 1.35 times more volatile than Nathans Famous. It trades about -0.04 of its total potential returns per unit of risk. Nathans Famous is currently generating about 0.02 per unit of volatility. If you would invest  7,074  in Nathans Famous on October 25, 2024 and sell it today you would earn a total of  843.00  from holding Nathans Famous or generate 11.92% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  Nathans Famous

RCI Hospitality Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 12 (%) 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.

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous 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 Nathans Famous

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

The idea behind RCI Hospitality Holdings and Nathans Famous 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.