Correlation Between Bausch Health and Nintendo

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

Diversification Opportunities for Bausch Health and Nintendo

-0.76

Correlation Coefficient

Bausch Health  Nintendo

Pay attention - limited upside

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

Pair Corralation between Bausch Health and Nintendo

Assuming the 90 days horizon Bausch Health Companies is expected to under-perform the Nintendo. In addition to that, Bausch Health is 1.13 times more volatile than Nintendo Co. It trades about -0.03 of its total potential returns per unit of risk. Nintendo Co is currently generating about 0.15 per unit of volatility. If you would invest  1,360  in Nintendo Co on December 2, 2024 and sell it today you would earn a total of  390.00  from holding Nintendo Co or generate 28.68% return on investment over 90 days.

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

Bausch Health Companies  vs.  Nintendo Co

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.

Nintendo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Nintendo

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

The idea behind Bausch Health Companies and Nintendo Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.