Correlation Between Bausch Health and National Beverage
Can any of the company-specific risk be diversified away by investing in both Bausch Health and National Beverage 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 National Beverage 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 National Beverage Corp, you can compare the effects of market volatilities on Bausch Health and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and National Beverage.
Diversification Opportunities for Bausch Health and National Beverage
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bausch and National is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Bausch Health i.e., Bausch Health and National Beverage go up and down completely randomly.
Pair Corralation between Bausch Health and National Beverage
Assuming the 90 days horizon Bausch Health Companies is expected to generate 2.11 times more return on investment than National Beverage. However, Bausch Health is 2.11 times more volatile than National Beverage Corp. It trades about 0.06 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.02 per unit of risk. If you would invest 556.00 in Bausch Health Companies on December 10, 2024 and sell it today you would earn a total of 103.00 from holding Bausch Health Companies or generate 18.53% 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. National Beverage Corp
Performance |
| Timeline |
| Bausch Health Companies |
| National Beverage Corp |
Bausch Health and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and National Beverage
The main advantage of trading using opposite Bausch Health and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Bausch Health vs. Computershare Limited | Bausch Health vs. Beta Systems Software | Bausch Health vs. Kingdee International Software | Bausch Health vs. USU Software AG |
| National Beverage vs. Scientific Games | National Beverage vs. MOVIE GAMES SA | National Beverage vs. Peijia Medical Limited | National Beverage vs. SCANDMEDICAL SOLDK 040 |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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