Correlation Between CVS Health and Bausch Health
Can any of the company-specific risk be diversified away by investing in both CVS Health and Bausch 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 CVS Health and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Bausch Health Companies, you can compare the effects of market volatilities on CVS Health and Bausch 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 CVS Health with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Bausch Health.
Diversification Opportunities for CVS Health and Bausch Health
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Bausch is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies and CVS 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 CVS Health are associated (or correlated) with Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of CVS Health i.e., CVS Health and Bausch Health go up and down completely randomly.
Pair Corralation between CVS Health and Bausch Health
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Bausch Health. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.85 times less risky than Bausch Health. The stock trades about -0.04 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 |
CVS Health vs. Bausch Health Companies
Performance |
| Timeline |
| CVS Health |
| Bausch Health Companies |
CVS Health and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Bausch Health
The main advantage of trading using opposite CVS Health and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Bausch 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 Bausch Health will offset losses from the drop in Bausch Health's long position.| CVS Health vs. INTERSHOP Communications Aktiengesellschaft | CVS Health vs. Computershare Limited | CVS Health vs. Charter Communications | CVS Health vs. KRISPY KREME DL 01 |
| Bausch Health vs. Vulcan Materials | Bausch Health vs. ARROW ELECTRONICS | Bausch Health vs. Arrow Electronics | Bausch Health vs. Richardson Electronics |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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