Correlation Between PURETECH HEALTH and RCI Hospitality

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

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

Diversification Opportunities for PURETECH HEALTH and RCI Hospitality

0.57

Correlation Coefficient

PURETECH HEALTH  RCI Hospitality

Very weak diversification

The 3 months correlation between PURETECH and RCI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC 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 PURETECH HEALTH 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 PURETECH HEALTH PLC 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 PURETECH HEALTH i.e., PURETECH HEALTH and RCI Hospitality go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and RCI Hospitality

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the RCI Hospitality. In addition to that, PURETECH HEALTH is 1.29 times more volatile than RCI Hospitality Holdings. It trades about -0.02 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.02 per unit of volatility. If you would invest  8,271  in RCI Hospitality Holdings on October 11, 2024 and sell it today you would lose (2,761) from holding RCI Hospitality Holdings or give up 33.38% of portfolio value over 90 days.

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

PURETECH HEALTH PLC  vs.  RCI Hospitality Holdings

PURETECH HEALTH PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PURETECH HEALTH PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PURETECH HEALTH is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

RCI Hospitality Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RCI Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PURETECH HEALTH and RCI Hospitality

The main advantage of trading using opposite PURETECH HEALTH and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PURETECH HEALTH 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 PURETECH HEALTH PLC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.