Correlation Between Bausch Health and Champion Bear

Can any of the company-specific risk be diversified away by investing in both Bausch Health and Champion Bear 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 Champion Bear 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 Champion Bear Resources, you can compare the effects of market volatilities on Bausch Health and Champion Bear 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 Champion Bear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Champion Bear.

Diversification Opportunities for Bausch Health and Champion Bear

0.31

Correlation Coefficient

Bausch Health  Champion Bear

Weak diversification

The 3 months correlation between Bausch and Champion is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Champion Bear Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Bear Resources 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 Champion Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Bear Resources has no effect on the direction of Bausch Health i.e., Bausch Health and Champion Bear go up and down completely randomly.

Pair Corralation between Bausch Health and Champion Bear

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the Champion Bear. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 13.43 times less risky than Champion Bear. The stock trades about -0.1 of its potential returns per unit of risk. The Champion Bear Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Champion Bear Resources on October 10, 2024 and sell it today you would earn a total of  1.50  from holding Champion Bear Resources or generate 50.0% return on investment over 90 days.

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

Bausch Health Companies  vs.  Champion Bear Resources

Bausch Health Companies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Champion Bear Resources

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Bear Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Champion Bear showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Champion Bear

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

The idea behind Bausch Health Companies and Champion Bear Resources 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.