Correlation Between Eisai Co and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Eisai Co 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 Eisai Co and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eisai Co and Bausch Health Companies, you can compare the effects of market volatilities on Eisai Co 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 Eisai Co with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eisai Co and Bausch Health.
Diversification Opportunities for Eisai Co and Bausch Health
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eisai and Bausch is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co 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 Eisai Co 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 Eisai Co 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 Eisai Co i.e., Eisai Co and Bausch Health go up and down completely randomly.
Pair Corralation between Eisai Co and Bausch Health
Assuming the 90 days horizon Eisai Co is expected to under-perform the Bausch Health. But the stock apears to be less risky and, when comparing its historical volatility, Eisai Co is 1.05 times less risky than Bausch Health. The stock trades about -0.09 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 719.00 in Bausch Health Companies on August 28, 2024 and sell it today you would earn a total of 32.00 from holding Bausch Health Companies or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eisai Co vs. Bausch Health Companies
Performance |
| Timeline |
| Eisai Co |
| Bausch Health Companies |
Eisai Co and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eisai Co and Bausch Health
The main advantage of trading using opposite Eisai Co and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai Co 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.| Eisai Co vs. Shionogi Co | Eisai Co vs. Ipsen SA | Eisai Co vs. Dr Reddys Laboratories | Eisai Co vs. Superior Plus Corp |
| Bausch Health vs. Shionogi Co | Bausch Health vs. Ipsen SA | Bausch Health vs. Dr Reddys Laboratories | Bausch Health vs. Superior Plus Corp |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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