Correlation Between RCI Hospitality and Dalata Hotel

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

Diversification Opportunities for RCI Hospitality and Dalata Hotel

0.07

Correlation Coefficient

RCI Hospitality  Dalata Hotel

Significant diversification

The 3 months correlation between RCI and Dalata is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group 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 Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Dalata Hotel go up and down completely randomly.

Pair Corralation between RCI Hospitality and Dalata Hotel

If you would invest  4,443  in RCI Hospitality Holdings on September 15, 2024 and sell it today you would earn a total of  766.00  from holding RCI Hospitality Holdings or generate 17.24% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  Dalata Hotel Group

RCI Hospitality Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 9 (%) 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.

Dalata Hotel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalata Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dalata Hotel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCI Hospitality and Dalata Hotel

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

The idea behind RCI Hospitality Holdings and Dalata Hotel Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.