Correlation Between Bausch Health and CVS Health
Can any of the company-specific risk be diversified away by investing in both Bausch Health and CVS Health 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 CVS Health 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 CVS Health, you can compare the effects of market volatilities on Bausch Health and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and CVS Health.
Diversification Opportunities for Bausch Health and CVS Health
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bausch and CVS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Bausch Health i.e., Bausch Health and CVS Health go up and down completely randomly.
Pair Corralation between Bausch Health and CVS Health
Assuming the 90 days horizon Bausch Health Companies is expected to generate 1.85 times more return on investment than CVS Health. However, Bausch Health is 1.85 times more volatile than CVS Health. It trades about 0.02 of its potential returns per unit of risk. CVS Health is currently generating about -0.04 per unit of risk. If you would invest 705.00 in Bausch Health Companies on September 2, 2024 and sell it today you would earn a total of 78.00 from holding Bausch Health Companies or generate 11.06% 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. CVS Health
Performance |
| Timeline |
| Bausch Health Companies |
| CVS Health |
Bausch Health and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and CVS Health
The main advantage of trading using opposite Bausch Health and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Bausch Health vs. Vulcan Materials | Bausch Health vs. ARROW ELECTRONICS | Bausch Health vs. Arrow Electronics | Bausch Health vs. Richardson Electronics |
| CVS Health vs. INTERSHOP Communications Aktiengesellschaft | CVS Health vs. Computershare Limited | CVS Health vs. Charter Communications | CVS Health vs. KRISPY KREME DL 01 |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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