Correlation Between Bausch Health and Prestige Brand
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Prestige Brand 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 Prestige Brand 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 Prestige Brand Holdings, you can compare the effects of market volatilities on Bausch Health and Prestige Brand 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 Prestige Brand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Prestige Brand.
Diversification Opportunities for Bausch Health and Prestige Brand
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bausch and Prestige is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Prestige Brand Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Brand Holdings 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 Prestige Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Brand Holdings has no effect on the direction of Bausch Health i.e., Bausch Health and Prestige Brand go up and down completely randomly.
Pair Corralation between Bausch Health and Prestige Brand
Considering the 90-day investment horizon Bausch Health is expected to generate 1.25 times less return on investment than Prestige Brand. In addition to that, Bausch Health is 2.12 times more volatile than Prestige Brand Holdings. It trades about 0.03 of its total potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.08 per unit of volatility. If you would invest 5,825 in Prestige Brand Holdings on August 31, 2024 and sell it today you would earn a total of 2,652 from holding Prestige Brand Holdings or generate 45.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Prestige Brand Holdings
Performance |
| Timeline |
| Bausch Health Companies |
| Prestige Brand Holdings |
Bausch Health and Prestige Brand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Prestige Brand
The main advantage of trading using opposite Bausch Health and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Prestige Brand 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 Prestige Brand will offset losses from the drop in Prestige Brand's long position.The idea behind Bausch Health Companies and Prestige Brand Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Prestige Brand vs. Evotec SE ADR | Prestige Brand vs. Supernus Pharmaceuticals | Prestige Brand vs. Collegium Pharmaceutical | Prestige Brand vs. Regencell Bioscience 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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