Correlation Between Sea and RCI Hospitality

Can any of the company-specific risk be diversified away by investing in both Sea and RCI Hospitality 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 Sea and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sea and RCI Hospitality Holdings, you can compare the effects of market volatilities on Sea and RCI Hospitality 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 Sea with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and RCI Hospitality.

Diversification Opportunities for Sea and RCI Hospitality

0.72

Correlation Coefficient

Sea  RCI Hospitality

Poor diversification

The 3 months correlation between Sea and RCI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sea and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings and Sea 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 Sea are associated (or correlated) with RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Sea i.e., Sea and RCI Hospitality go up and down completely randomly.

Pair Corralation between Sea and RCI Hospitality

Allowing for the 90-day total investment horizon Sea is expected to under-perform the RCI Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Sea is 1.61 times less risky than RCI Hospitality. The stock trades about -0.21 of its potential returns per unit of risk. The RCI Hospitality Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,274  in RCI Hospitality Holdings on October 8, 2024 and sell it today you would earn a total of  382.00  from holding RCI Hospitality Holdings or generate 7.24% return on investment over 90 days.

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

Sea  vs.  RCI Hospitality Holdings

Sea

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RCI Hospitality Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and RCI Hospitality

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

The idea behind Sea and RCI Hospitality 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.