Correlation Between Bausch Health and Incannex Healthcare

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

Diversification Opportunities for Bausch Health and Incannex Healthcare

0.66

Correlation Coefficient

Bausch Health  Incannex Healthcare

Poor diversification

The 3 months correlation between Bausch and Incannex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Incannex Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incannex Healthcare 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 Incannex Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incannex Healthcare has no effect on the direction of Bausch Health i.e., Bausch Health and Incannex Healthcare go up and down completely randomly.

Pair Corralation between Bausch Health and Incannex Healthcare

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.56 times more return on investment than Incannex Healthcare. However, Bausch Health Companies is 1.79 times less risky than Incannex Healthcare. It trades about 0.17 of its potential returns per unit of risk. Incannex Healthcare Ltd is currently generating about 0.04 per unit of risk. If you would invest  607.00  in Bausch Health Companies on September 1, 2024 and sell it today you would earn a total of  230.00  from holding Bausch Health Companies or generate 37.89% return on investment over 90 days.

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

Bausch Health Companies  vs.  Incannex Healthcare Ltd

Bausch Health Companies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Incannex Healthcare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Incannex Healthcare Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical indicators, Incannex Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Incannex Healthcare

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

The idea behind Bausch Health Companies and Incannex Healthcare Ltd 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.