Correlation Between Bausch Health and Klpierre

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

Diversification Opportunities for Bausch Health and Klpierre

-0.21

Correlation Coefficient

Bausch Health  Klpierre

Very good diversification

The 3 months correlation between Bausch and Klpierre is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA 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 Klpierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of Bausch Health i.e., Bausch Health and Klpierre go up and down completely randomly.

Pair Corralation between Bausch Health and Klpierre

Assuming the 90 days horizon Bausch Health Companies is expected to generate 3.84 times more return on investment than Klpierre. However, Bausch Health is 3.84 times more volatile than Klpierre SA. It trades about 0.1 of its potential returns per unit of risk. Klpierre SA is currently generating about -0.08 per unit of risk. If you would invest  614.00  in Bausch Health Companies on September 15, 2024 and sell it today you would earn a total of  120.00  from holding Bausch Health Companies or generate 19.54% return on investment over 90 days.

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

Bausch Health Companies  vs.  Klpierre SA

Bausch Health Companies

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bausch Health reported solid returns over the last few months and may actually be approaching a breakup point.

Klpierre SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klpierre SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Klpierre is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bausch Health and Klpierre

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

The idea behind Bausch Health Companies and Klpierre SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .