Correlation Between Bloomin Brands and RCI Hospitality

Can any of the company-specific risk be diversified away by investing in both Bloomin Brands and RCI Hospitality 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 Bloomin Brands and RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bloomin Brands and RCI Hospitality Holdings, you can compare the effects of market volatilities on Bloomin Brands and RCI Hospitality 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 Bloomin Brands with a short position of RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloomin Brands and RCI Hospitality.

Diversification Opportunities for Bloomin Brands and RCI Hospitality

-0.16

Correlation Coefficient

Bloomin Brands  RCI Hospitality

Good diversification

The 3 months correlation between Bloomin and RCI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings and Bloomin Brands 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 Bloomin Brands are associated (or correlated) with RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Bloomin Brands i.e., Bloomin Brands and RCI Hospitality go up and down completely randomly.

Pair Corralation between Bloomin Brands and RCI Hospitality

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the RCI Hospitality. In addition to that, Bloomin Brands is 1.52 times more volatile than RCI Hospitality Holdings. It trades about -0.15 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about 0.25 per unit of volatility. If you would invest  4,357  in RCI Hospitality Holdings on August 16, 2024 and sell it today you would earn a total of  663.00  from holding RCI Hospitality Holdings or generate 15.22% return on investment over 90 days.

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

Bloomin Brands  vs.  RCI Hospitality Holdings

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 unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

RCI Hospitality Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 6 (%) 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.

Pair Trading with Bloomin Brands and RCI Hospitality

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

The idea behind Bloomin Brands and RCI Hospitality Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..