Correlation Between RCI Hospitality and National CineMedia

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

Diversification Opportunities for RCI Hospitality and National CineMedia

0.24

Correlation Coefficient

RCI Hospitality  National CineMedia

Modest diversification

The 3 months correlation between RCI and National is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and National CineMedia go up and down completely randomly.

Pair Corralation between RCI Hospitality and National CineMedia

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the National CineMedia. But the stock apears to be less risky and, when comparing its historical volatility, RCI Hospitality Holdings is 3.43 times less risky than National CineMedia. The stock trades about -0.04 of its potential returns per unit of risk. The National CineMedia is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  239.00  in National CineMedia on September 18, 2024 and sell it today you would earn a total of  485.00  from holding National CineMedia or generate 202.93% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  National CineMedia

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.

National CineMedia

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RCI Hospitality and National CineMedia

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

The idea behind RCI Hospitality Holdings and National CineMedia 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.