Correlation Between Bausch Health and Universe Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Universe 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 Universe 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 Universe Pharmaceuticals, you can compare the effects of market volatilities on Bausch Health and Universe 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 Universe Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Universe Pharmaceuticals.
Diversification Opportunities for Bausch Health and Universe Pharmaceuticals
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bausch and Universe is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Universe Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universe 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 Universe Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universe Pharmaceuticals has no effect on the direction of Bausch Health i.e., Bausch Health and Universe Pharmaceuticals go up and down completely randomly.
Pair Corralation between Bausch Health and Universe Pharmaceuticals
Considering the 90-day investment horizon Bausch Health is expected to generate 6.58 times less return on investment than Universe Pharmaceuticals. But when comparing it to its historical volatility, Bausch Health Companies is 8.14 times less risky than Universe Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Universe Pharmaceuticals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,050 in Universe Pharmaceuticals on August 31, 2024 and sell it today you would lose (878.00) from holding Universe Pharmaceuticals or give up 83.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Universe Pharmaceuticals
Performance |
| Timeline |
| Bausch Health Companies |
| Universe Pharmaceuticals |
Bausch Health and Universe Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Universe Pharmaceuticals
The main advantage of trading using opposite Bausch Health and Universe Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Universe 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 Universe Pharmaceuticals will offset losses from the drop in Universe Pharmaceuticals' long position.The idea behind Bausch Health Companies and Universe Pharmaceuticals 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.| Universe Pharmaceuticals vs. Bausch Health Companies | Universe Pharmaceuticals vs. Haleon plc | Universe Pharmaceuticals vs. Intracellular Th |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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