Correlation Between Bausch Health and NOV

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

Diversification Opportunities for Bausch Health and NOV

-0.06

Correlation Coefficient

Bausch Health  NOV

Good diversification

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

Pair Corralation between Bausch Health and NOV

Assuming the 90 days horizon Bausch Health Companies is expected to under-perform the NOV. In addition to that, Bausch Health is 1.17 times more volatile than NOV Inc. It trades about -0.04 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.01 per unit of volatility. If you would invest  1,331  in NOV Inc on December 20, 2024 and sell it today you would lose (1.00) from holding NOV Inc or give up 0.08% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  NOV Inc

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NOV Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NOV 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 NOV

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

The idea behind Bausch Health Companies and NOV Inc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.