Correlation Between RCI Hospitality and PURETECH HEALTH

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

Diversification Opportunities for RCI Hospitality and PURETECH HEALTH

-0.05

Correlation Coefficient

RCI Hospitality  PURETECH HEALTH

Good diversification

The 3 months correlation between RCI and PURETECH is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings and PURETECH HEALTH PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURETECH HEALTH PLC 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 PURETECH HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURETECH HEALTH PLC has no effect on the direction of RCI Hospitality i.e., RCI Hospitality and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between RCI Hospitality and PURETECH HEALTH

Assuming the 90 days trading horizon RCI Hospitality Holdings is expected to generate 0.96 times more return on investment than PURETECH HEALTH. However, RCI Hospitality Holdings is 1.04 times less risky than PURETECH HEALTH. It trades about 0.14 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.04 per unit of risk. If you would invest  4,089  in RCI Hospitality Holdings on October 26, 2024 and sell it today you would earn a total of  1,041  from holding RCI Hospitality Holdings or generate 25.46% return on investment over 90 days.

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

RCI Hospitality Holdings  vs.  PURETECH HEALTH PLC

RCI Hospitality Holdings

Risk-Adjusted Performance

10 of 100

Good

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. 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.

PURETECH HEALTH PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURETECH HEALTH PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with RCI Hospitality and PURETECH HEALTH

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

The idea behind RCI Hospitality Holdings and PURETECH HEALTH PLC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.