Correlation Between RCI Hospitality and Relief Therapeutics

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

Diversification Opportunities for RCI Hospitality and Relief Therapeutics

0.14

Correlation Coefficient

RCI Hospitality  Relief Therapeutics

Average diversification

The 3 months correlation between RCI and Relief is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics 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 Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Relief Therapeutics go up and down completely randomly.

Pair Corralation between RCI Hospitality and Relief Therapeutics

If you would invest  5,314  in RCI Hospitality Holdings on September 24, 2024 and sell it today you would earn a total of  395.00  from holding RCI Hospitality Holdings or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Relief Therapeutics Holding

RCI Hospitality Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Relief Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Relief Therapeutics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RCI Hospitality and Relief Therapeutics

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

The idea behind RCI Hospitality Holdings and Relief Therapeutics Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.