Correlation Between BlackRock and Bausch

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

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

Diversification Opportunities for BlackRock and Bausch

0.76

Correlation Coefficient

BlackRock  Bausch

Poor diversification

The 3 months correlation between BlackRock and Bausch is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies and BlackRock 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 BlackRock are associated (or correlated) with Bausch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of BlackRock i.e., BlackRock and Bausch go up and down completely randomly.

Pair Corralation between BlackRock and Bausch

Considering the 90-day investment horizon BlackRock is expected to generate 53.69 times less return on investment than Bausch. But when comparing it to its historical volatility, BlackRock is 57.64 times less risky than Bausch. It trades about 0.07 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,216  in Bausch Health Companies on October 5, 2024 and sell it today you would earn a total of  90.00  from holding Bausch Health Companies or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	41.81%
Values	Daily Returns

BlackRock  vs.  Bausch Health Companies

BlackRock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Bausch Health Companies investors.

Pair Trading with BlackRock and Bausch

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

The idea behind BlackRock and Bausch Health Companies 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.