Correlation Between Avadel Pharmaceuticals and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Avadel Pharmaceuticals 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 Avadel Pharmaceuticals and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avadel Pharmaceuticals PLC and Bausch Health Companies, you can compare the effects of market volatilities on Avadel Pharmaceuticals 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 Avadel Pharmaceuticals with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avadel Pharmaceuticals and Bausch Health.
Diversification Opportunities for Avadel Pharmaceuticals and Bausch Health
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Avadel and Bausch is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC 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 Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC 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 Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Bausch Health go up and down completely randomly.
Pair Corralation between Avadel Pharmaceuticals and Bausch Health
Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to generate 1.06 times more return on investment than Bausch Health. However, Avadel Pharmaceuticals is 1.06 times more volatile than Bausch Health Companies. It trades about 0.04 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 798.00 in Avadel Pharmaceuticals PLC on September 2, 2024 and sell it today you would earn a total of 308.00 from holding Avadel Pharmaceuticals PLC or generate 38.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avadel Pharmaceuticals PLC vs. Bausch Health Companies
Performance |
| Timeline |
| Avadel Pharmaceuticals |
| Bausch Health Companies |
Avadel Pharmaceuticals and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avadel Pharmaceuticals and Bausch Health
The main advantage of trading using opposite Avadel Pharmaceuticals and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avadel Pharmaceuticals 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.| Avadel Pharmaceuticals vs. Neurocrine Biosciences | Avadel Pharmaceuticals vs. Ironwood Pharmaceuticals | Avadel Pharmaceuticals vs. Alkermes Plc | Avadel Pharmaceuticals vs. Intracellular Th |
| Bausch Health vs. Crinetics Pharmaceuticals | Bausch Health vs. Enanta Pharmaceuticals | Bausch Health vs. Amicus Therapeutics | Bausch Health vs. Connect Biopharma Holdings |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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