Correlation Between RCI Hospitality and PLAYMATES TOYS

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

Diversification Opportunities for RCI Hospitality and PLAYMATES TOYS

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between RCI and PLAYMATES is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between RCI Hospitality and PLAYMATES TOYS

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to generate 0.69 times more return on investment than PLAYMATES TOYS. However, RCI Hospitality Holdings is 1.45 times less risky than PLAYMATES TOYS. It trades about 0.15 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about -0.02 per unit of risk. If you would invest  3,954  in RCI Hospitality Holdings on October 25, 2024 and sell it today you would earn a total of  1,176  from holding RCI Hospitality Holdings or generate 29.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

RCI Hospitality Holdings  vs.  PLAYMATES TOYS

 Performance 
       Timeline  
RCI Hospitality Holdings 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
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. In spite of comparatively uncertain basic indicators, RCI Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.
PLAYMATES TOYS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

RCI Hospitality and PLAYMATES TOYS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RCI Hospitality and PLAYMATES TOYS

The main advantage of trading using opposite RCI Hospitality and PLAYMATES TOYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality position performs unexpectedly, PLAYMATES TOYS 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 PLAYMATES TOYS will offset losses from the drop in PLAYMATES TOYS's long position.
The idea behind RCI Hospitality Holdings and PLAYMATES TOYS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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