Correlation Between Chevron Corp and Bausch

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Bausch 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 Chevron Corp and Bausch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chevron Corp and Bausch Health Companies, you can compare the effects of market volatilities on Chevron Corp and Bausch 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 Chevron Corp with a short position of Bausch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Bausch.

Diversification Opportunities for Chevron Corp and Bausch

0.88

Correlation Coefficient

Chevron Corp  Bausch

Very poor diversification

The 3 months correlation between Chevron and Bausch is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies and Chevron Corp 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 Chevron Corp are associated (or correlated) with Bausch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of Chevron Corp i.e., Chevron Corp and Bausch go up and down completely randomly.

Pair Corralation between Chevron Corp and Bausch

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.52 times more return on investment than Bausch. However, Chevron Corp is 1.93 times less risky than Bausch. It trades about 0.14 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.04 per unit of risk. If you would invest  14,066  in Chevron Corp on September 14, 2024 and sell it today you would earn a total of  1,405  from holding Chevron Corp or generate 9.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	39.68%
Values	Daily Returns

Chevron Corp  vs.  Bausch Health Companies

Chevron Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bausch Health Companies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bausch is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and Bausch

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

The idea behind Chevron Corp and Bausch Health Companies 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 .