Correlation Between Bausch Health and Kilroy Realty

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

Diversification Opportunities for Bausch Health and Kilroy Realty

0.71

Correlation Coefficient

Bausch Health  Kilroy Realty

Poor diversification

The 3 months correlation between Bausch and Kilroy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty Corp 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Bausch Health i.e., Bausch Health and Kilroy Realty go up and down completely randomly.

Pair Corralation between Bausch Health and Kilroy Realty

Assuming the 90 days horizon Bausch Health Companies is expected to generate 1.41 times more return on investment than Kilroy Realty. However, Bausch Health is 1.41 times more volatile than Kilroy Realty Corp. It trades about -0.07 of its potential returns per unit of risk. Kilroy Realty Corp is currently generating about -0.16 per unit of risk. If you would invest  725.00  in Bausch Health Companies on December 29, 2024 and sell it today you would lose (110.00) from holding Bausch Health Companies or give up 15.17% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Kilroy Realty Corp

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Kilroy Realty Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kilroy Realty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bausch Health and Kilroy Realty

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

The idea behind Bausch Health Companies and Kilroy Realty Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.