Correlation Between RCI Hospitality and Philip Morris

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

Diversification Opportunities for RCI Hospitality and Philip Morris

-0.33

Correlation Coefficient

RCI Hospitality  Philip Morris

Very good diversification

The 3 months correlation between RCI and Philip is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Philip Morris go up and down completely randomly.

Pair Corralation between RCI Hospitality and Philip Morris

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Philip Morris. In addition to that, RCI Hospitality is 1.28 times more volatile than Philip Morris International. It trades about -0.31 of its total potential returns per unit of risk. Philip Morris International is currently generating about -0.03 per unit of volatility. If you would invest  12,242  in Philip Morris International on October 22, 2024 and sell it today you would lose (83.00) from holding Philip Morris International or give up 0.68% of portfolio value over 90 days.

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

RCI Hospitality Holdings  vs.  Philip Morris International

RCI Hospitality Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 10 (%) 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.

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RCI Hospitality and Philip Morris

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

The idea behind RCI Hospitality Holdings and Philip Morris 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.