Correlation Between Perrigo Company and Bausch Health
Can any of the company-specific risk be diversified away by investing in both Perrigo Company 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 Perrigo Company and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perrigo Company PLC and Bausch Health Companies, you can compare the effects of market volatilities on Perrigo Company 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 Perrigo Company with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perrigo Company and Bausch Health.
Diversification Opportunities for Perrigo Company and Bausch Health
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Perrigo and Bausch is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Perrigo Company PLC 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 Perrigo Company 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 Perrigo Company PLC 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 Perrigo Company i.e., Perrigo Company and Bausch Health go up and down completely randomly.
Pair Corralation between Perrigo Company and Bausch Health
Given the investment horizon of 90 days Perrigo Company PLC is expected to generate 0.56 times more return on investment than Bausch Health. However, Perrigo Company PLC is 1.79 times less risky than Bausch Health. It trades about 0.28 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.01 per unit of risk. If you would invest 2,543 in Perrigo Company PLC on August 31, 2024 and sell it today you would earn a total of 341.00 from holding Perrigo Company PLC or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Perrigo Company PLC vs. Bausch Health Companies
Performance |
| Timeline |
| Perrigo Company |
| Bausch Health Companies |
Perrigo Company and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Perrigo Company and Bausch Health
The main advantage of trading using opposite Perrigo Company and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perrigo Company 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.| Perrigo Company vs. Bausch Health Companies | Perrigo Company vs. Haleon plc | Perrigo Company vs. Intracellular Th |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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