Correlation Between RCI Hospitality and Ark Restaurants

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

Diversification Opportunities for RCI Hospitality and Ark Restaurants

-0.05

Correlation Coefficient

RCI Hospitality  Ark Restaurants

Good diversification

The 3 months correlation between RCI and Ark is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp 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 Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Ark Restaurants go up and down completely randomly.

Pair Corralation between RCI Hospitality and Ark Restaurants

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Ark Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 1.18 times less risky than Ark Restaurants. The stock trades about -0.03 of its potential returns per unit of risk. The Ark Restaurants Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,549  in Ark Restaurants Corp on September 20, 2024 and sell it today you would lose (475.00) from holding Ark Restaurants Corp or give up 30.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.59%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Ark Restaurants Corp

RCI Hospitality Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 13 (%) 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.

Ark Restaurants Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with RCI Hospitality and Ark Restaurants

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

The idea behind RCI Hospitality Holdings and Ark Restaurants Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.