Correlation Between Alliance Data and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Alliance Data 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 Alliance Data and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and Bausch Health Companies, you can compare the effects of market volatilities on Alliance Data 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 Alliance Data with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Bausch Health.
Diversification Opportunities for Alliance Data and Bausch Health
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alliance and Bausch is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems 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 Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Bausch Health go up and down completely randomly.
Pair Corralation between Alliance Data and Bausch Health
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 0.81 times more return on investment than Bausch Health. However, Alliance Data Systems is 1.23 times less risky than Bausch Health. It trades about 0.05 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 per unit of risk. If you would invest 3,488 in Alliance Data Systems on October 12, 2024 and sell it today you would earn a total of 2,120 from holding Alliance Data Systems or generate 60.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. Bausch Health Companies
Performance |
| Timeline |
| Alliance Data Systems |
| Bausch Health Companies |
Alliance Data and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Bausch Health
The main advantage of trading using opposite Alliance Data and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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.| Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc | Alliance Data vs. Apple Inc |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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