Correlation Between Bausch Health and Salesforce

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

Diversification Opportunities for Bausch Health and Salesforce

-0.29

Correlation Coefficient

Bausch Health  Salesforce

Very good diversification

The 3 months correlation between Bausch and Salesforce is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and SalesforceCom CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalesforceCom CDR 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalesforceCom CDR has no effect on the direction of Bausch Health i.e., Bausch Health and Salesforce go up and down completely randomly.

Pair Corralation between Bausch Health and Salesforce

Assuming the 90 days trading horizon Bausch Health is expected to generate 2.15 times less return on investment than Salesforce. In addition to that, Bausch Health is 1.64 times more volatile than SalesforceCom CDR. It trades about 0.02 of its total potential returns per unit of risk. SalesforceCom CDR is currently generating about 0.07 per unit of volatility. If you would invest  1,386  in SalesforceCom CDR on October 25, 2024 and sell it today you would earn a total of  1,274  from holding SalesforceCom CDR or generate 91.92% return on investment over 90 days.

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

Bausch Health Companies  vs.  SalesforceCom CDR

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 current stock price disarray, may contribute to short-term losses for the investors.

SalesforceCom CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SalesforceCom CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Salesforce

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

The idea behind Bausch Health Companies and SalesforceCom CDR 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.