Correlation Between Bausch Health and Shionogi

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

Diversification Opportunities for Bausch Health and Shionogi

-0.21

Correlation Coefficient

Bausch Health  Shionogi

Very good diversification

The 3 months correlation between Bausch and Shionogi is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Shionogi Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi 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 Shionogi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shionogi has no effect on the direction of Bausch Health i.e., Bausch Health and Shionogi go up and down completely randomly.

Pair Corralation between Bausch Health and Shionogi

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Shionogi. In addition to that, Bausch Health is 1.5 times more volatile than Shionogi Co Ltd. It trades about -0.07 of its total potential returns per unit of risk. Shionogi Co Ltd is currently generating about 0.1 per unit of volatility. If you would invest  700.00  in Shionogi Co Ltd on November 28, 2024 and sell it today you would earn a total of  75.00  from holding Shionogi Co Ltd or generate 10.71% return on investment over 90 days.

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

Bausch Health Companies  vs.  Shionogi Co Ltd

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shionogi

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Shionogi may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bausch Health and Shionogi

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

The idea behind Bausch Health Companies and Shionogi Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.