Correlation Between Bausch Health and Pebblebrook Hotel

Can any of the company-specific risk be diversified away by investing in both Bausch Health and Pebblebrook Hotel 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 Bausch Health and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bausch Health Companies and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Bausch Health and Pebblebrook Hotel 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 Bausch Health with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Pebblebrook Hotel.

Diversification Opportunities for Bausch Health and Pebblebrook Hotel

-0.16

Correlation Coefficient

Bausch Health  Pebblebrook Hotel

Good diversification

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

Pair Corralation between Bausch Health and Pebblebrook Hotel

Assuming the 90 days horizon Bausch Health Companies is expected to generate 1.69 times more return on investment than Pebblebrook Hotel. However, Bausch Health is 1.69 times more volatile than Pebblebrook Hotel Trust. It trades about 0.03 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.01 per unit of risk. If you would invest  571.00  in Bausch Health Companies on September 21, 2024 and sell it today you would earn a total of  129.00  from holding Bausch Health Companies or generate 22.59% return on investment over 90 days.

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

Bausch Health Companies  vs.  Pebblebrook Hotel Trust

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bausch Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pebblebrook Hotel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bausch Health and Pebblebrook Hotel

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

The idea behind Bausch Health Companies and Pebblebrook Hotel Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.