Correlation Between Volkswagen and RCI Hospitality

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

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

Diversification Opportunities for Volkswagen and RCI Hospitality

-0.84

Correlation Coefficient

Volkswagen  RCI Hospitality

Pay attention - limited upside

The 3 months correlation between Volkswagen and RCI is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG VZO 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 Volkswagen 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 Volkswagen AG VZO 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 Volkswagen i.e., Volkswagen and RCI Hospitality go up and down completely randomly.

Pair Corralation between Volkswagen and RCI Hospitality

Assuming the 90 days trading horizon Volkswagen AG VZO is expected to generate 1.04 times more return on investment than RCI Hospitality. However, Volkswagen is 1.04 times more volatile than RCI Hospitality Holdings. It trades about 0.13 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.25 per unit of risk. If you would invest  8,866  in Volkswagen AG VZO on December 25, 2024 and sell it today you would earn a total of  1,274  from holding Volkswagen AG VZO or generate 14.37% return on investment over 90 days.

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

Volkswagen AG VZO  vs.  RCI Hospitality Holdings

Volkswagen AG VZO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG VZO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Volkswagen exhibited solid returns over the last few months and may actually be approaching a breakup point.

RCI Hospitality Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days RCI Hospitality Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Volkswagen and RCI Hospitality

The main advantage of trading using opposite Volkswagen and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG VZO 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.