Correlation Between Bausch Health and HUTCHMED DRC

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

Diversification Opportunities for Bausch Health and HUTCHMED DRC

0.32

Correlation Coefficient

Bausch Health  HUTCHMED DRC

Weak diversification

The 3 months correlation between Bausch and HUTCHMED is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC 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 HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of Bausch Health i.e., Bausch Health and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Bausch Health and HUTCHMED DRC

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.99 times more return on investment than HUTCHMED DRC. However, Bausch Health Companies is 1.01 times less risky than HUTCHMED DRC. It trades about 0.16 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about 0.04 per unit of risk. If you would invest  607.00  in Bausch Health Companies on August 31, 2024 and sell it today you would earn a total of  205.00  from holding Bausch Health Companies or generate 33.77% return on investment over 90 days.

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

Bausch Health Companies  vs.  HUTCHMED DRC

Bausch Health Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

HUTCHMED DRC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, HUTCHMED DRC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bausch Health and HUTCHMED DRC

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

The idea behind Bausch Health Companies and HUTCHMED DRC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.