Correlation Between RCI Hospitality and Tokyu Construction

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

Diversification Opportunities for RCI Hospitality and Tokyu Construction

0.7

Correlation Coefficient

RCI Hospitality  Tokyu Construction

Poor diversification

The 3 months correlation between RCI and Tokyu is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction 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 Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Tokyu Construction go up and down completely randomly.

Pair Corralation between RCI Hospitality and Tokyu Construction

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to generate 3.34 times more return on investment than Tokyu Construction. However, RCI Hospitality is 3.34 times more volatile than Tokyu Construction Co. It trades about 0.14 of its potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.09 per unit of risk. If you would invest  3,984  in RCI Hospitality Holdings on October 22, 2024 and sell it today you would earn a total of  1,066  from holding RCI Hospitality Holdings or generate 26.76% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  Tokyu Construction Co

RCI Hospitality Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, RCI Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tokyu Construction

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokyu Construction is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCI Hospitality and Tokyu Construction

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

The idea behind RCI Hospitality Holdings and Tokyu Construction Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.