Correlation Between Bausch Health and Texas Instruments
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Texas Instruments 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 Texas Instruments 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 Texas Instruments Incorporated, you can compare the effects of market volatilities on Bausch Health and Texas Instruments 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 Texas Instruments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Texas Instruments.
Diversification Opportunities for Bausch Health and Texas Instruments
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bausch and Texas is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Texas Instruments Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Instruments 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 Texas Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Instruments has no effect on the direction of Bausch Health i.e., Bausch Health and Texas Instruments go up and down completely randomly.
Pair Corralation between Bausch Health and Texas Instruments
Assuming the 90 days horizon Bausch Health Companies is expected to generate 2.2 times more return on investment than Texas Instruments. However, Bausch Health is 2.2 times more volatile than Texas Instruments Incorporated. It trades about 0.09 of its potential returns per unit of risk. Texas Instruments Incorporated is currently generating about 0.04 per unit of risk. If you would invest 563.00 in Bausch Health Companies on September 3, 2024 and sell it today you would earn a total of 220.00 from holding Bausch Health Companies or generate 39.08% 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. Texas Instruments Incorporated
Performance |
| Timeline |
| Bausch Health Companies |
| Texas Instruments |
Bausch Health and Texas Instruments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Texas Instruments
The main advantage of trading using opposite Bausch Health and Texas Instruments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Texas Instruments 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 Texas Instruments will offset losses from the drop in Texas Instruments' long position.The idea behind Bausch Health Companies and Texas Instruments Incorporated 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.| Texas Instruments vs. DeVry Education Group | Texas Instruments vs. CosmoSteel Holdings Limited | Texas Instruments vs. Nippon Steel | Texas Instruments vs. EMBARK EDUCATION LTD |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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