Correlation Between Bausch Health and Windtree Therapeutics

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

Diversification Opportunities for Bausch Health and Windtree Therapeutics

0.68

Correlation Coefficient

Bausch Health  Windtree Therapeutics

Poor diversification

The 3 months correlation between Bausch and Windtree is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Windtree Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Windtree Therapeutics 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 Windtree Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Windtree Therapeutics has no effect on the direction of Bausch Health i.e., Bausch Health and Windtree Therapeutics go up and down completely randomly.

Pair Corralation between Bausch Health and Windtree Therapeutics

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.44 times more return on investment than Windtree Therapeutics. However, Bausch Health Companies is 2.25 times less risky than Windtree Therapeutics. It trades about -0.03 of its potential returns per unit of risk. Windtree Therapeutics is currently generating about -0.44 per unit of risk. If you would invest  837.00  in Bausch Health Companies on November 29, 2024 and sell it today you would lose (67.00) from holding Bausch Health Companies or give up 8.0% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Windtree Therapeutics

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 rather sound technical indicators, Bausch Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Windtree Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Windtree Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bausch Health and Windtree Therapeutics

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

The idea behind Bausch Health Companies and Windtree Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.