Correlation Between Bausch Health and Regeneron Pharmaceuticals

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

Diversification Opportunities for Bausch Health and Regeneron Pharmaceuticals

0.42

Correlation Coefficient

Bausch Health  Regeneron Pharmaceuticals

Very weak diversification

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

Pair Corralation between Bausch Health and Regeneron Pharmaceuticals

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Regeneron Pharmaceuticals. In addition to that, Bausch Health is 1.38 times more volatile than Regeneron Pharmaceuticals. It trades about -0.06 of its total potential returns per unit of risk. Regeneron Pharmaceuticals is currently generating about -0.07 per unit of volatility. If you would invest  70,169  in Regeneron Pharmaceuticals on December 29, 2024 and sell it today you would lose (6,586) from holding Regeneron Pharmaceuticals or give up 9.39% 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.  Regeneron Pharmaceuticals

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.

Regeneron Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bausch Health and Regeneron Pharmaceuticals

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

The idea behind Bausch Health Companies and Regeneron 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.