Correlation Between New Residential and Bausch Health
Can any of the company-specific risk be diversified away by investing in both New Residential and Bausch 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 New Residential and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Bausch Health Companies, you can compare the effects of market volatilities on New Residential and Bausch 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 New Residential with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Bausch Health.
Diversification Opportunities for New Residential and Bausch Health
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Bausch is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment 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 New Residential 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 New Residential Investment are associated (or correlated) with Bausch Health. 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 New Residential i.e., New Residential and Bausch Health go up and down completely randomly.
Pair Corralation between New Residential and Bausch Health
Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.41 times more return on investment than Bausch Health. However, New Residential Investment is 2.43 times less risky than Bausch Health. It trades about 0.11 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.08 per unit of risk. If you would invest 1,036 in New Residential Investment on October 12, 2024 and sell it today you would earn a total of 24.00 from holding New Residential Investment or generate 2.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
New Residential Investment vs. Bausch Health Companies
Performance |
| Timeline |
| New Residential Inve |
| Bausch Health Companies |
New Residential and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Bausch Health
The main advantage of trading using opposite New Residential and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Bausch 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 Bausch Health will offset losses from the drop in Bausch Health's long position.| New Residential vs. SEKISUI CHEMICAL | New Residential vs. ATRESMEDIA | New Residential vs. Sinopec Shanghai Petrochemical | New Residential vs. CNVISION MEDIA |
| Bausch Health vs. Automatic Data Processing | Bausch Health vs. Heidelberg Materials AG | Bausch Health vs. Alliance Data Systems | Bausch Health vs. Linedata Services SA |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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