Correlation Between Solstad Offshore and RCI Hospitality
Can any of the company-specific risk be diversified away by investing in both Solstad Offshore 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 Solstad Offshore and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solstad Offshore ASA and RCI Hospitality Holdings, you can compare the effects of market volatilities on Solstad Offshore 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 Solstad Offshore with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and RCI Hospitality.
Diversification Opportunities for Solstad Offshore and RCI Hospitality
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solstad and RCI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA 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 Solstad Offshore 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 Solstad Offshore ASA 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 Solstad Offshore i.e., Solstad Offshore and RCI Hospitality go up and down completely randomly.
Pair Corralation between Solstad Offshore and RCI Hospitality
Assuming the 90 days trading horizon Solstad Offshore is expected to generate 10.47 times less return on investment than RCI Hospitality. But when comparing it to its historical volatility, Solstad Offshore ASA is 1.12 times less risky than RCI Hospitality. It trades about 0.03 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,813 in RCI Hospitality Holdings on October 10, 2024 and sell it today you would earn a total of 697.00 from holding RCI Hospitality Holdings or generate 14.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Solstad Offshore ASA vs. RCI Hospitality Holdings
Performance |
Timeline |
Solstad Offshore ASA |
RCI Hospitality Holdings |
Solstad Offshore and RCI Hospitality Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Solstad Offshore and RCI Hospitality
The main advantage of trading using opposite Solstad Offshore and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore 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.Solstad Offshore vs. Ribbon Communications | Solstad Offshore vs. CITY OFFICE REIT | Solstad Offshore vs. ecotel communication ag | Solstad Offshore vs. COMPUTERSHARE |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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