Correlation Between RCI Hospitality and Estee Lauder

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

Diversification Opportunities for RCI Hospitality and Estee Lauder

-0.6

Correlation Coefficient

RCI Hospitality  Estee Lauder

Excellent diversification

The 3 months correlation between RCI and Estee is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies 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 Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Estee Lauder go up and down completely randomly.

Pair Corralation between RCI Hospitality and Estee Lauder

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.39 times more return on investment than Estee Lauder. However, RCI Hospitality is 1.39 times more volatile than Estee Lauder Companies. It trades about 0.19 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about 0.08 per unit of risk. If you would invest  5,262  in RCI Hospitality Holdings on September 27, 2024 and sell it today you would earn a total of  581.00  from holding RCI Hospitality Holdings or generate 11.04% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  Estee Lauder Companies

RCI Hospitality Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 14 (%) 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.

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with RCI Hospitality and Estee Lauder

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

The idea behind RCI Hospitality Holdings and Estee Lauder Companies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.