Correlation Between Bausch and 00108WAF7

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Can any of the company-specific risk be diversified away by investing in both Bausch and 00108WAF7 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 Bausch and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Health Companies and AEP TEX INC, you can compare the effects of market volatilities on Bausch and 00108WAF7 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 Bausch with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch and 00108WAF7.

Diversification Opportunities for Bausch and 00108WAF7

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bausch and 00108WAF7 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC and Bausch 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 Bausch Health Companies are associated (or correlated) with 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Bausch i.e., Bausch and 00108WAF7 go up and down completely randomly.

Pair Corralation between Bausch and 00108WAF7

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the 00108WAF7. In addition to that, Bausch is 2.42 times more volatile than AEP TEX INC. It trades about -0.34 of its total potential returns per unit of risk. AEP TEX INC is currently generating about 0.13 per unit of volatility. If you would invest  7,190  in AEP TEX INC on October 25, 2024 and sell it today you would earn a total of  478.00  from holding AEP TEX INC or generate 6.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy69.23%
ValuesDaily Returns

Bausch Health Companies  vs.  AEP TEX INC

 Performance 
       Timeline  
Bausch Health Companies 

Risk-Adjusted Performance

0 of 100

 
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Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Bausch Health Companies investors.
AEP TEX INC 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 00108WAF7 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bausch and 00108WAF7 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bausch and 00108WAF7

The main advantage of trading using opposite Bausch and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch position performs unexpectedly, 00108WAF7 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 00108WAF7 will offset losses from the drop in 00108WAF7's long position.
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The idea behind Bausch Health Companies and AEP TEX INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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