Correlation Between Bausch Lomb and Noble Plc

Can any of the company-specific risk be diversified away by investing in both Bausch Lomb and Noble Plc 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 Lomb and Noble Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bausch Lomb Corp and Noble plc, you can compare the effects of market volatilities on Bausch Lomb and Noble Plc 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 Lomb with a short position of Noble Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Lomb and Noble Plc.

Diversification Opportunities for Bausch Lomb and Noble Plc

-0.32

Correlation Coefficient

Bausch Lomb  Noble Plc

Very good diversification

The 3 months correlation between Bausch and Noble is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc and Bausch Lomb 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 Lomb Corp are associated (or correlated) with Noble Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble plc has no effect on the direction of Bausch Lomb i.e., Bausch Lomb and Noble Plc go up and down completely randomly.

Pair Corralation between Bausch Lomb and Noble Plc

Given the investment horizon of 90 days Bausch Lomb Corp is expected to generate 1.08 times more return on investment than Noble Plc. However, Bausch Lomb is 1.08 times more volatile than Noble plc. It trades about 0.18 of its potential returns per unit of risk. Noble plc is currently generating about -0.01 per unit of risk. If you would invest  1,565  in Bausch Lomb Corp on September 12, 2024 and sell it today you would earn a total of  500.00  from holding Bausch Lomb Corp or generate 31.95% return on investment over 90 days.

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

Bausch Lomb Corp  vs.  Noble plc

Bausch Lomb Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Noble plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Noble Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bausch Lomb and Noble Plc

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

The idea behind Bausch Lomb Corp and Noble plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.