Correlation Between Bausch Health and Brookfield Office

Can any of the company-specific risk be diversified away by investing in both Bausch Health and Brookfield Office 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 Health and Brookfield Office 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 Brookfield Office Properties, you can compare the effects of market volatilities on Bausch Health and Brookfield Office 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 Health with a short position of Brookfield Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Brookfield Office.

Diversification Opportunities for Bausch Health and Brookfield Office

-0.42

Correlation Coefficient

Bausch Health  Brookfield Office

Very good diversification

The 3 months correlation between Bausch and Brookfield is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office and Bausch Health 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 Brookfield Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Office has no effect on the direction of Bausch Health i.e., Bausch Health and Brookfield Office go up and down completely randomly.

Pair Corralation between Bausch Health and Brookfield Office

Assuming the 90 days trading horizon Bausch Health is expected to generate 4.45 times less return on investment than Brookfield Office. In addition to that, Bausch Health is 2.47 times more volatile than Brookfield Office Properties. It trades about 0.02 of its total potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.24 per unit of volatility. If you would invest  2,130  in Brookfield Office Properties on October 21, 2024 and sell it today you would earn a total of  90.00  from holding Brookfield Office Properties or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bausch Health Companies  vs.  Brookfield Office Properties

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Bausch Health is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brookfield Office

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Brookfield Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Brookfield Office

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

The idea behind Bausch Health Companies and Brookfield Office Properties 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.