Correlation Between Bausch Health and Magna Mining

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

Diversification Opportunities for Bausch Health and Magna Mining

-0.3

Correlation Coefficient

Bausch Health  Magna Mining

Very good diversification

The 3 months correlation between Bausch and Magna is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Bausch Health i.e., Bausch Health and Magna Mining go up and down completely randomly.

Pair Corralation between Bausch Health and Magna Mining

Assuming the 90 days trading horizon Bausch Health is expected to generate 103.52 times less return on investment than Magna Mining. But when comparing it to its historical volatility, Bausch Health Companies is 1.19 times less risky than Magna Mining. It trades about 0.0 of its potential returns per unit of risk. Magna Mining is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Magna Mining on October 23, 2024 and sell it today you would earn a total of  35.00  from holding Magna Mining or generate 29.66% 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.  Magna Mining

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.

Magna Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Magna Mining

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

The idea behind Bausch Health Companies and Magna Mining 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.