Correlation Between Bausch Lomb and 683720AA4

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Can any of the company-specific risk be diversified away by investing in both Bausch Lomb and 683720AA4 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 683720AA4 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 Open Text, you can compare the effects of market volatilities on Bausch Lomb and 683720AA4 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 683720AA4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Lomb and 683720AA4.

Diversification Opportunities for Bausch Lomb and 683720AA4

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bausch and 683720AA4 is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp and Open Text in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text 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 683720AA4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text has no effect on the direction of Bausch Lomb i.e., Bausch Lomb and 683720AA4 go up and down completely randomly.

Pair Corralation between Bausch Lomb and 683720AA4

Given the investment horizon of 90 days Bausch Lomb Corp is expected to generate 4.56 times more return on investment than 683720AA4. However, Bausch Lomb is 4.56 times more volatile than Open Text. It trades about 0.13 of its potential returns per unit of risk. Open Text is currently generating about -0.13 per unit of risk. If you would invest  1,625  in Bausch Lomb Corp on September 3, 2024 and sell it today you would earn a total of  357.00  from holding Bausch Lomb Corp or generate 21.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy93.75%
ValuesDaily Returns

Bausch Lomb Corp  vs.  Open Text

 Performance 
       Timeline  
Bausch Lomb Corp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.
Open Text 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Open Text has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 683720AA4 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Bausch Lomb and 683720AA4 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bausch Lomb and 683720AA4

The main advantage of trading using opposite Bausch Lomb and 683720AA4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Lomb position performs unexpectedly, 683720AA4 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 683720AA4 will offset losses from the drop in 683720AA4's long position.
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The idea behind Bausch Lomb Corp and Open Text 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.
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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