Correlation Between RCI Hospitality and BG Foods

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

Diversification Opportunities for RCI Hospitality and BG Foods

-0.12

Correlation Coefficient

RCI Hospitality  BG Foods

Good diversification

The 3 months correlation between RCI and DHR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and BG Foods go up and down completely randomly.

Pair Corralation between RCI Hospitality and BG Foods

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to under-perform the BG Foods. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.46 times less risky than BG Foods. The stock trades about -0.23 of its potential returns per unit of risk. The BG Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  673.00  in BG Foods on December 19, 2024 and sell it today you would lose (1.00) from holding BG Foods or give up 0.15% 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.  BG Foods

RCI Hospitality Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCI Hospitality Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BG Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with RCI Hospitality and BG Foods

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

The idea behind RCI Hospitality Holdings and BG Foods 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.