Correlation Between Bausch Health and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on Bausch Health and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Avadel Pharmaceuticals.
Diversification Opportunities for Bausch Health and Avadel Pharmaceuticals
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bausch and Avadel is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals 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 Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Bausch Health i.e., Bausch Health and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between Bausch Health and Avadel Pharmaceuticals
Considering the 90-day investment horizon Bausch Health Companies is expected to generate 1.0 times more return on investment than Avadel Pharmaceuticals. However, Bausch Health is 1.0 times more volatile than Avadel Pharmaceuticals PLC. It trades about 0.08 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about -0.06 per unit of risk. If you would invest 633.00 in Bausch Health Companies on August 30, 2024 and sell it today you would earn a total of 179.00 from holding Bausch Health Companies or generate 28.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| Bausch Health Companies |
| Avadel Pharmaceuticals |
Bausch Health and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Avadel Pharmaceuticals
The main advantage of trading using opposite Bausch Health and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Avadel Pharmaceuticals 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.| Bausch Health vs. Viatris | Bausch Health vs. Catalent | Bausch Health vs. Tilray Inc | Bausch Health vs. Zoetis Inc |
| Avadel Pharmaceuticals vs. Emergent Biosolutions | Avadel Pharmaceuticals vs. Bausch Health Companies | Avadel Pharmaceuticals vs. Neurocrine Biosciences | Avadel Pharmaceuticals vs. Teva Pharma Industries |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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