Correlation Between Royal Canadian and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Royal Canadian 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 Royal Canadian and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Canadian Mint and Bausch Health Companies, you can compare the effects of market volatilities on Royal Canadian 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 Royal Canadian with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Canadian and Bausch Health.
Diversification Opportunities for Royal Canadian and Bausch Health
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Bausch is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint 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 Royal Canadian 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 Royal Canadian Mint 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 Royal Canadian i.e., Royal Canadian and Bausch Health go up and down completely randomly.
Pair Corralation between Royal Canadian and Bausch Health
Assuming the 90 days trading horizon Royal Canadian Mint is expected to under-perform the Bausch Health. But the stock apears to be less risky and, when comparing its historical volatility, Royal Canadian Mint is 2.51 times less risky than Bausch Health. The stock trades about -0.11 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,137 in Bausch Health Companies on August 31, 2024 and sell it today you would earn a total of 48.00 from holding Bausch Health Companies or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Canadian Mint vs. Bausch Health Companies
Performance |
| Timeline |
| Royal Canadian Mint |
| Bausch Health Companies |
Royal Canadian and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Canadian and Bausch Health
The main advantage of trading using opposite Royal Canadian and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Canadian 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.| Royal Canadian vs. Royal Canadian Mint | Royal Canadian vs. iShares Gold Bullion | Royal Canadian vs. Sprott Physical Gold | Royal Canadian vs. Purpose Gold Bullion |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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