Correlation Between RCI Hospitality and Bausch

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

Diversification Opportunities for RCI Hospitality and Bausch

0.18

Correlation Coefficient

RCI Hospitality  Bausch

Average diversification

The 3 months correlation between RCI and Bausch is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 Bausch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and Bausch go up and down completely randomly.

Pair Corralation between RCI Hospitality and Bausch

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to generate 0.43 times more return on investment than Bausch. However, RCI Hospitality Holdings is 2.31 times less risky than Bausch. It trades about 0.14 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.12 per unit of risk. If you would invest  4,321  in RCI Hospitality Holdings on October 22, 2024 and sell it today you would earn a total of  911.00  from holding RCI Hospitality Holdings or generate 21.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.19%
Values	Daily Returns

RCI Hospitality Holdings  vs.  Bausch Health Companies

RCI Hospitality Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 10 (%) 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.

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Bausch Health Companies investors.

Pair Trading with RCI Hospitality and Bausch

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

The idea behind RCI Hospitality Holdings and Bausch Health Companies 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.