Correlation Between Bausch Health and Biohaven Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Biohaven Pharmaceutical 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 Biohaven Pharmaceutical 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 Biohaven Pharmaceutical Holding, you can compare the effects of market volatilities on Bausch Health and Biohaven Pharmaceutical 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 Biohaven Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Biohaven Pharmaceutical.
Diversification Opportunities for Bausch Health and Biohaven Pharmaceutical
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bausch and Biohaven is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Biohaven Pharmaceutical Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biohaven Pharmaceutical 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 Biohaven Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biohaven Pharmaceutical has no effect on the direction of Bausch Health i.e., Bausch Health and Biohaven Pharmaceutical go up and down completely randomly.
Pair Corralation between Bausch Health and Biohaven Pharmaceutical
Considering the 90-day investment horizon Bausch Health is expected to generate 1.86 times less return on investment than Biohaven Pharmaceutical. But when comparing it to its historical volatility, Bausch Health Companies is 1.23 times less risky than Biohaven Pharmaceutical. It trades about 0.04 of its potential returns per unit of risk. Biohaven Pharmaceutical Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,301 in Biohaven Pharmaceutical Holding on September 2, 2024 and sell it today you would earn a total of 1,300 from holding Biohaven Pharmaceutical Holding or generate 39.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Biohaven Pharmaceutical Holdin
Performance |
| Timeline |
| Bausch Health Companies |
| Biohaven Pharmaceutical |
Bausch Health and Biohaven Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Biohaven Pharmaceutical
The main advantage of trading using opposite Bausch Health and Biohaven Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Biohaven Pharmaceutical 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 Biohaven Pharmaceutical will offset losses from the drop in Biohaven Pharmaceutical's long position.| Bausch Health vs. Crinetics Pharmaceuticals | Bausch Health vs. Enanta Pharmaceuticals | Bausch Health vs. Amicus Therapeutics | Bausch Health vs. Connect Biopharma Holdings |
| Biohaven Pharmaceutical vs. Tff Pharmaceuticals | Biohaven Pharmaceutical vs. Eliem Therapeutics | Biohaven Pharmaceutical vs. Inhibrx | Biohaven Pharmaceutical vs. Enliven Therapeutics |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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