Correlation Between Bausch Lomb and Sellas Life

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

Diversification Opportunities for Bausch Lomb and Sellas Life

-0.32

Correlation Coefficient

Bausch Lomb  Sellas Life

Very good diversification

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

Pair Corralation between Bausch Lomb and Sellas Life

Given the investment horizon of 90 days Bausch Lomb Corp is expected to under-perform the Sellas Life. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Lomb Corp is 4.21 times less risky than Sellas Life. The stock trades about -0.15 of its potential returns per unit of risk. The Sellas Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Sellas Life Sciences on December 28, 2024 and sell it today you would earn a total of  17.00  from holding Sellas Life Sciences or generate 17.17% 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.  Sellas Life Sciences

Bausch Lomb Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Lomb Corp 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sellas Life Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Sellas Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Lomb and Sellas Life

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

The idea behind Bausch Lomb Corp and Sellas Life Sciences 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.