Correlation Between Bausch Health and Takeda Pharmaceutical

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

Diversification Opportunities for Bausch Health and Takeda Pharmaceutical

-0.13

Correlation Coefficient

Bausch Health  Takeda Pharmaceutical

Good diversification

The 3 months correlation between Bausch and Takeda is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Takeda Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Bausch Health i.e., Bausch Health and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between Bausch Health and Takeda Pharmaceutical

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Takeda Pharmaceutical. In addition to that, Bausch Health is 2.63 times more volatile than Takeda Pharmaceutical Co. It trades about -0.04 of its total potential returns per unit of risk. Takeda Pharmaceutical Co is currently generating about 0.08 per unit of volatility. If you would invest  1,362  in Takeda Pharmaceutical Co on November 28, 2024 and sell it today you would earn a total of  74.00  from holding Takeda Pharmaceutical Co or generate 5.43% 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.  Takeda Pharmaceutical Co

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.

Takeda Pharmaceutical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bausch Health and Takeda Pharmaceutical

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

The idea behind Bausch Health Companies and Takeda Pharmaceutical Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.