Correlation Between Bausch Health and Nkarta

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

Diversification Opportunities for Bausch Health and Nkarta

0.42

Correlation Coefficient

Bausch Health  Nkarta

Very weak diversification

The 3 months correlation between Bausch and Nkarta is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Nkarta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nkarta Inc 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 Nkarta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nkarta Inc has no effect on the direction of Bausch Health i.e., Bausch Health and Nkarta go up and down completely randomly.

Pair Corralation between Bausch Health and Nkarta

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Nkarta. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 2.5 times less risky than Nkarta. The stock trades about -0.08 of its potential returns per unit of risk. The Nkarta Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Nkarta Inc on December 28, 2024 and sell it today you would lose (35.00) from holding Nkarta Inc or give up 15.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Bausch Health Companies  vs.  Nkarta Inc

Bausch Health Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nkarta Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nkarta is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bausch Health and Nkarta

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

The idea behind Bausch Health Companies and Nkarta Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..