Correlation Between Bausch Lomb and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both Bausch Lomb and Palomar Holdings 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 Lomb and Palomar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Lomb Corp and Palomar Holdings, you can compare the effects of market volatilities on Bausch Lomb and Palomar Holdings 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 Lomb with a short position of Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Lomb and Palomar Holdings.
Diversification Opportunities for Bausch Lomb and Palomar Holdings
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bausch and Palomar is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Bausch Lomb 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 Lomb Corp are associated (or correlated) with Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of Bausch Lomb i.e., Bausch Lomb and Palomar Holdings go up and down completely randomly.
Pair Corralation between Bausch Lomb and Palomar Holdings
Given the investment horizon of 90 days Bausch Lomb Corp is expected to under-perform the Palomar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Lomb Corp is 1.27 times less risky than Palomar Holdings. The stock trades about -0.09 of its potential returns per unit of risk. The Palomar Holdings is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 8,838 in Palomar Holdings on September 2, 2024 and sell it today you would earn a total of 1,992 from holding Palomar Holdings or generate 22.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Lomb Corp vs. Palomar Holdings
Performance |
| Timeline |
| Bausch Lomb Corp |
| Palomar Holdings |
Bausch Lomb and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Lomb and Palomar Holdings
The main advantage of trading using opposite Bausch Lomb and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Lomb position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.| Bausch Lomb vs. The Cooper Companies, | Bausch Lomb vs. ICU Medical | Bausch Lomb vs. Hologic | Bausch Lomb vs. Becton Dickinson and |
| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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