Correlation Between Bausch Health and UnitedHealth Group

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

Diversification Opportunities for Bausch Health and UnitedHealth Group

0.03

Correlation Coefficient

Bausch Health  UnitedHealth Group

Significant diversification

The 3 months correlation between Bausch and UnitedHealth is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and UnitedHealth Group CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group CDR has no effect on the direction of Bausch Health i.e., Bausch Health and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Bausch Health and UnitedHealth Group

Assuming the 90 days trading horizon Bausch Health Companies is expected to generate 1.85 times more return on investment than UnitedHealth Group. However, Bausch Health is 1.85 times more volatile than UnitedHealth Group CDR. It trades about 0.11 of its potential returns per unit of risk. UnitedHealth Group CDR is currently generating about -0.07 per unit of risk. If you would invest  860.00  in Bausch Health Companies on September 13, 2024 and sell it today you would earn a total of  213.00  from holding Bausch Health Companies or generate 24.77% 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.  UnitedHealth Group CDR

Bausch Health Companies

Risk-Adjusted Performance

8 of 100

OK

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

UnitedHealth Group CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bausch Health and UnitedHealth Group

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

The idea behind Bausch Health Companies and UnitedHealth Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.