Correlation Between RCI Hospitality and Cogent Communications

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

Diversification Opportunities for RCI Hospitality and Cogent Communications

-0.41

Correlation Coefficient

RCI Hospitality  Cogent Communications

Very good diversification

The 3 months correlation between RCI and Cogent is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications 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 Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Cogent Communications go up and down completely randomly.

Pair Corralation between RCI Hospitality and Cogent Communications

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to under-perform the Cogent Communications. In addition to that, RCI Hospitality is 1.14 times more volatile than Cogent Communications Holdings. It trades about -0.03 of its total potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.03 per unit of volatility. If you would invest  5,558  in Cogent Communications Holdings on October 24, 2024 and sell it today you would earn a total of  1,442  from holding Cogent Communications Holdings or generate 25.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Cogent Communications Holdings

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. 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.

Cogent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Cogent Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCI Hospitality and Cogent Communications

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

The idea behind RCI Hospitality Holdings and Cogent Communications Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.