Correlation Between Big 5 and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Bausch Health Companies, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Bausch Health.
Diversification Opportunities for Big 5 and Bausch Health
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and Bausch is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting 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 Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Bausch Health go up and down completely randomly.
Pair Corralation between Big 5 and Bausch Health
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Bausch Health. In addition to that, Big 5 is 1.28 times more volatile than Bausch Health Companies. It trades about -0.01 of its total potential returns per unit of risk. Bausch Health Companies is currently generating about 0.18 per unit of volatility. If you would invest 572.00 in Bausch Health Companies on September 12, 2024 and sell it today you would earn a total of 221.00 from holding Bausch Health Companies or generate 38.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Bausch Health Companies
Performance |
| Timeline |
| Big 5 Sporting |
| Bausch Health Companies |
Big 5 and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Bausch Health
The main advantage of trading using opposite Big 5 and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.| Big 5 vs. Superior Plus Corp | Big 5 vs. SIVERS SEMICONDUCTORS AB | Big 5 vs. NorAm Drilling AS | Big 5 vs. Norsk Hydro ASA |
| Bausch Health vs. Shionogi Co | Bausch Health vs. Dr Reddys Laboratories | Bausch Health vs. Superior Plus Corp | Bausch Health vs. NMI 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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