Correlation Between Bausch Health and Redhill Biopharma

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

Diversification Opportunities for Bausch Health and Redhill Biopharma

0.41

Correlation Coefficient

Bausch Health  Redhill Biopharma

Very weak diversification

The 3 months correlation between Bausch and Redhill is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Redhill Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redhill Biopharma 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 Redhill Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redhill Biopharma has no effect on the direction of Bausch Health i.e., Bausch Health and Redhill Biopharma go up and down completely randomly.

Pair Corralation between Bausch Health and Redhill Biopharma

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.6 times more return on investment than Redhill Biopharma. However, Bausch Health Companies is 1.66 times less risky than Redhill Biopharma. It trades about -0.06 of its potential returns per unit of risk. Redhill Biopharma is currently generating about -0.28 per unit of risk. If you would invest  773.00  in Bausch Health Companies on December 29, 2024 and sell it today you would lose (98.00) from holding Bausch Health Companies or give up 12.68% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Redhill Biopharma

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 latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Redhill Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redhill Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bausch Health and Redhill Biopharma

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

The idea behind Bausch Health Companies and Redhill Biopharma 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.