Correlation Between Heartland Financial and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Heartland Financial 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 Heartland Financial and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heartland Financial USA and Bausch Health Companies, you can compare the effects of market volatilities on Heartland Financial 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 Heartland Financial with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Financial and Bausch Health.
Diversification Opportunities for Heartland Financial and Bausch Health
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Heartland and Bausch is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Financial USA 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 Heartland Financial 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 Heartland Financial USA 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 Heartland Financial i.e., Heartland Financial and Bausch Health go up and down completely randomly.
Pair Corralation between Heartland Financial and Bausch Health
Assuming the 90 days horizon Heartland Financial USA is expected to generate 0.67 times more return on investment than Bausch Health. However, Heartland Financial USA is 1.5 times less risky than Bausch Health. It trades about 0.05 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 per unit of risk. If you would invest 4,160 in Heartland Financial USA on September 3, 2024 and sell it today you would earn a total of 2,190 from holding Heartland Financial USA or generate 52.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heartland Financial USA vs. Bausch Health Companies
Performance |
| Timeline |
| Heartland Financial USA |
| Bausch Health Companies |
Heartland Financial and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heartland Financial and Bausch Health
The main advantage of trading using opposite Heartland Financial and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heartland Financial 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.| Heartland Financial vs. FIREWEED METALS P | Heartland Financial vs. Constellation Software | Heartland Financial vs. JAPAN TOBACCO UNSPADR12 | Heartland Financial vs. Jacquet Metal Service |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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