Correlation Between ARK Autonomous and Bausch

Can any of the company-specific risk be diversified away by investing in both ARK Autonomous and Bausch 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 ARK Autonomous and Bausch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARK Autonomous Technology and Bausch Health Companies, you can compare the effects of market volatilities on ARK Autonomous and Bausch 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 ARK Autonomous with a short position of Bausch. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Autonomous and Bausch.

Diversification Opportunities for ARK Autonomous and Bausch

0.6

Correlation Coefficient

ARK Autonomous  Bausch

Poor diversification

The 3 months correlation between ARK and Bausch is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ARK Autonomous Technology 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 ARK Autonomous 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 ARK Autonomous Technology are associated (or correlated) with Bausch. 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 ARK Autonomous i.e., ARK Autonomous and Bausch go up and down completely randomly.

Pair Corralation between ARK Autonomous and Bausch

Given the investment horizon of 90 days ARK Autonomous Technology is expected to generate 1.25 times more return on investment than Bausch. However, ARK Autonomous is 1.25 times more volatile than Bausch Health Companies. It trades about 0.23 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.07 per unit of risk. If you would invest  6,091  in ARK Autonomous Technology on October 10, 2024 and sell it today you would earn a total of  1,904  from holding ARK Autonomous Technology or generate 31.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.42%
Values	Daily Returns

ARK Autonomous Technology  vs.  Bausch Health Companies

ARK Autonomous Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK Autonomous Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, ARK Autonomous reported solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ARK Autonomous and Bausch

The main advantage of trading using opposite ARK Autonomous and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Autonomous position performs unexpectedly, Bausch 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 will offset losses from the drop in Bausch's long position.

The idea behind ARK Autonomous Technology and Bausch Health Companies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.