Correlation Between Bausch Health and Mitsubishi Electric
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Mitsubishi Electric 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 Mitsubishi Electric 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 Mitsubishi Electric, you can compare the effects of market volatilities on Bausch Health and Mitsubishi Electric 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 Mitsubishi Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Mitsubishi Electric.
Diversification Opportunities for Bausch Health and Mitsubishi Electric
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bausch and Mitsubishi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric 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 Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of Bausch Health i.e., Bausch Health and Mitsubishi Electric go up and down completely randomly.
Pair Corralation between Bausch Health and Mitsubishi Electric
Assuming the 90 days horizon Bausch Health Companies is expected to generate 1.3 times more return on investment than Mitsubishi Electric. However, Bausch Health is 1.3 times more volatile than Mitsubishi Electric. It trades about 0.22 of its potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.03 per unit of risk. If you would invest 528.00 in Bausch Health Companies on September 3, 2024 and sell it today you would earn a total of 255.00 from holding Bausch Health Companies or generate 48.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Mitsubishi Electric
Performance |
| Timeline |
| Bausch Health Companies |
| Mitsubishi Electric |
Bausch Health and Mitsubishi Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Mitsubishi Electric
The main advantage of trading using opposite Bausch Health and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Mitsubishi Electric 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 Mitsubishi Electric will offset losses from the drop in Mitsubishi Electric's long position.The idea behind Bausch Health Companies and Mitsubishi Electric 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.| Mitsubishi Electric vs. Bausch Health Companies | Mitsubishi Electric vs. Geely Automobile Holdings | Mitsubishi Electric vs. Grupo Carso SAB | Mitsubishi Electric vs. Diamondrock Hospitality Co |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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