Correlation Between Bausch Health and Adial Pharmaceuticals

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

Diversification Opportunities for Bausch Health and Adial Pharmaceuticals

-0.22

Correlation Coefficient

Bausch Health  Adial Pharmaceuticals

Very good diversification

The 3 months correlation between Bausch and Adial is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Adial Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adial Pharmaceuticals 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 Adial Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adial Pharmaceuticals has no effect on the direction of Bausch Health i.e., Bausch Health and Adial Pharmaceuticals go up and down completely randomly.

Pair Corralation between Bausch Health and Adial Pharmaceuticals

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Adial Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.63 times less risky than Adial Pharmaceuticals. The stock trades about -0.18 of its potential returns per unit of risk. The Adial Pharmaceuticals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Adial Pharmaceuticals on September 14, 2024 and sell it today you would earn a total of  10.00  from holding Adial Pharmaceuticals or generate 10.1% 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.  Adial Pharmaceuticals

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Adial Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adial Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Adial Pharmaceuticals is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bausch Health and Adial Pharmaceuticals

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

The idea behind Bausch Health Companies and Adial Pharmaceuticals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.