Correlation Between RCI Hospitality and Bloomin Brands

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

Diversification Opportunities for RCI Hospitality and Bloomin Brands

0.38

Correlation Coefficient

RCI Hospitality  Bloomin Brands

Weak diversification

The 3 months correlation between RCI and Bloomin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands 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 Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Bloomin Brands go up and down completely randomly.

Pair Corralation between RCI Hospitality and Bloomin Brands

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 1.02 times more return on investment than Bloomin Brands. However, RCI Hospitality is 1.02 times more volatile than Bloomin Brands. It trades about 0.04 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.04 per unit of risk. If you would invest  4,344  in RCI Hospitality Holdings on June 22, 2024 and sell it today you would earn a total of  220.00  from holding RCI Hospitality Holdings or generate 5.06% 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.  Bloomin Brands

RCI Hospitality Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, RCI Hospitality may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with RCI Hospitality and Bloomin Brands

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

The idea behind RCI Hospitality Holdings and Bloomin Brands 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 Commodity Directory module to find actively traded commodities issued by global exchanges.