Correlation Between Bausch Health and Ramp Metals

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

Diversification Opportunities for Bausch Health and Ramp Metals

0.15

Correlation Coefficient

Bausch Health  Ramp Metals

Average diversification

The 3 months correlation between Bausch and Ramp is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Ramp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramp Metals 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 Ramp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramp Metals has no effect on the direction of Bausch Health i.e., Bausch Health and Ramp Metals go up and down completely randomly.

Pair Corralation between Bausch Health and Ramp Metals

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the Ramp Metals. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.62 times less risky than Ramp Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Ramp Metals is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Ramp Metals on October 6, 2024 and sell it today you would earn a total of  16.00  from holding Ramp Metals or generate 21.92% return on investment over 90 days.

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

Bausch Health Companies  vs.  Ramp Metals

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.

Ramp Metals

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ramp Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Ramp Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Ramp Metals

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

The idea behind Bausch Health Companies and Ramp Metals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.