Correlation Between Delta Air and Bausch

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

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

Diversification Opportunities for Delta Air and Bausch

0.31

Correlation Coefficient

Delta Air  Bausch

Weak diversification

The 3 months correlation between Delta and Bausch is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines 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 Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and Bausch go up and down completely randomly.

Pair Corralation between Delta Air and Bausch

Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.5 times more return on investment than Bausch. However, Delta Air Lines is 1.99 times less risky than Bausch. It trades about 0.15 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.12 per unit of risk. If you would invest  5,133  in Delta Air Lines on October 11, 2024 and sell it today you would earn a total of  1,009  from holding Delta Air Lines or generate 19.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.85%
Values	Daily Returns

Delta Air Lines  vs.  Bausch Health Companies

Delta Air Lines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

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 Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Bausch Health Companies investors.

Pair Trading with Delta Air and Bausch

The main advantage of trading using opposite Delta Air and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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 Delta Air Lines 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.