Correlation Between Bausch Health and WESTERN PER

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

Diversification Opportunities for Bausch Health and WESTERN PER

0.06

Correlation Coefficient

Bausch Health  WESTERN PER

Significant diversification

The 3 months correlation between Bausch and WESTERN is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and WESTERN PER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN PER 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 WESTERN PER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN PER has no effect on the direction of Bausch Health i.e., Bausch Health and WESTERN PER go up and down completely randomly.

Pair Corralation between Bausch Health and WESTERN PER

Assuming the 90 days horizon Bausch Health Companies is expected to under-perform the WESTERN PER. In addition to that, Bausch Health is 1.08 times more volatile than WESTERN PER. It trades about -0.03 of its total potential returns per unit of risk. WESTERN PER is currently generating about 0.05 per unit of volatility. If you would invest  97.00  in WESTERN PER on December 23, 2024 and sell it today you would earn a total of  7.00  from holding WESTERN PER or generate 7.22% return on investment over 90 days.

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

Bausch Health Companies  vs.  WESTERN PER

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. Despite nearly stable basic indicators, Bausch Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WESTERN PER

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN PER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, WESTERN PER may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bausch Health and WESTERN PER

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

The idea behind Bausch Health Companies and WESTERN PER 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.