Correlation Between Bausch Health and CHAR Technologies

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

Diversification Opportunities for Bausch Health and CHAR Technologies

-0.05

Correlation Coefficient

Bausch Health  CHAR Technologies

Good diversification

The 3 months correlation between Bausch and CHAR is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and CHAR Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAR Technologies 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 CHAR Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAR Technologies has no effect on the direction of Bausch Health i.e., Bausch Health and CHAR Technologies go up and down completely randomly.

Pair Corralation between Bausch Health and CHAR Technologies

Assuming the 90 days trading horizon Bausch Health is expected to generate 8.2 times less return on investment than CHAR Technologies. But when comparing it to its historical volatility, Bausch Health Companies is 1.78 times less risky than CHAR Technologies. It trades about 0.02 of its potential returns per unit of risk. CHAR Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20.00  in CHAR Technologies on October 4, 2024 and sell it today you would earn a total of  1.00  from holding CHAR Technologies or generate 5.0% 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.  CHAR Technologies

Bausch Health Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 2 (%) 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.

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHAR Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bausch Health and CHAR Technologies

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

The idea behind Bausch Health Companies and CHAR Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.