Correlation Between Bausch Health and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Meta Platforms 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 Bausch Health and Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Health Companies and Meta Platforms CDR, you can compare the effects of market volatilities on Bausch Health and Meta Platforms 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 Bausch Health with a short position of Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Meta Platforms.
Diversification Opportunities for Bausch Health and Meta Platforms
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bausch and Meta is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms CDR and Bausch Health 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 Bausch Health Companies are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of Bausch Health i.e., Bausch Health and Meta Platforms go up and down completely randomly.
Pair Corralation between Bausch Health and Meta Platforms
Assuming the 90 days trading horizon Bausch Health Companies is expected to generate 2.32 times more return on investment than Meta Platforms. However, Bausch Health is 2.32 times more volatile than Meta Platforms CDR. It trades about 0.07 of its potential returns per unit of risk. Meta Platforms CDR is currently generating about -0.12 per unit of risk. If you would invest 1,137 in Bausch Health Companies on August 31, 2024 and sell it today you would earn a total of 48.00 from holding Bausch Health Companies or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Meta Platforms CDR
Performance |
| Timeline |
| Bausch Health Companies |
| Meta Platforms CDR |
Bausch Health and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Meta Platforms
The main advantage of trading using opposite Bausch Health and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| Bausch Health vs. iShares Canadian HYBrid | Bausch Health vs. Brompton European Dividend | Bausch Health vs. Solar Alliance Energy | Bausch Health vs. PHN Multi Style All Cap |
| Meta Platforms vs. Cielo Waste Solutions | Meta Platforms vs. Eros Resources Corp | Meta Platforms vs. Forstrong Global Income | Meta Platforms vs. iShares Canadian HYBrid |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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