Correlation Between RCI Hospitality and Phibro Animal

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

Diversification Opportunities for RCI Hospitality and Phibro Animal

0.21

Correlation Coefficient

RCI Hospitality  Phibro Animal

Modest diversification

The 3 months correlation between RCI and Phibro is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health 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 Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Phibro Animal go up and down completely randomly.

Pair Corralation between RCI Hospitality and Phibro Animal

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to under-perform the Phibro Animal. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.21 times less risky than Phibro Animal. The stock trades about -0.02 of its potential returns per unit of risk. The Phibro Animal Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,288  in Phibro Animal Health on October 11, 2024 and sell it today you would earn a total of  672.00  from holding Phibro Animal Health or generate 52.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Phibro Animal Health

RCI Hospitality Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 16 (%) 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.

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RCI Hospitality and Phibro Animal

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

The idea behind RCI Hospitality Holdings and Phibro Animal Health 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.