Correlation Between Bausch Health and Starbucks CDR

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

Diversification Opportunities for Bausch Health and Starbucks CDR

0.34

Correlation Coefficient

Bausch Health  Starbucks CDR

Weak diversification

The 3 months correlation between Bausch and Starbucks is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Starbucks CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks CDR has no effect on the direction of Bausch Health i.e., Bausch Health and Starbucks CDR go up and down completely randomly.

Pair Corralation between Bausch Health and Starbucks CDR

Assuming the 90 days trading horizon Bausch Health Companies is expected to generate 2.24 times more return on investment than Starbucks CDR. However, Bausch Health is 2.24 times more volatile than Starbucks CDR. It trades about 0.01 of its potential returns per unit of risk. Starbucks CDR is currently generating about 0.01 per unit of risk. If you would invest  1,117  in Bausch Health Companies on October 25, 2024 and sell it today you would lose (5.00) from holding Bausch Health Companies or give up 0.45% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Starbucks 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 recent stock price disarray, may contribute to short-term losses for the investors.

Starbucks CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Starbucks CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bausch Health and Starbucks CDR

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

The idea behind Bausch Health Companies and Starbucks 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.