Correlation Between DRI Healthcare and Bausch Health

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

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

Diversification Opportunities for DRI Healthcare and Bausch Health

0.33

Correlation Coefficient

DRI Healthcare  Bausch Health

Weak diversification

The 3 months correlation between DRI and Bausch is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding DRI Healthcare Trust 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 DRI Healthcare 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 DRI Healthcare Trust are associated (or correlated) with Bausch Health. 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 DRI Healthcare i.e., DRI Healthcare and Bausch Health go up and down completely randomly.

Pair Corralation between DRI Healthcare and Bausch Health

Assuming the 90 days trading horizon DRI Healthcare Trust is expected to under-perform the Bausch Health. But the stock apears to be less risky and, when comparing its historical volatility, DRI Healthcare Trust is 1.45 times less risky than Bausch Health. The stock trades about -0.07 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,099  in Bausch Health Companies on December 2, 2024 and sell it today you would lose (24.00) from holding Bausch Health Companies or give up 2.18% of portfolio value over 90 days.

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

DRI Healthcare Trust  vs.  Bausch Health Companies

DRI Healthcare Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days DRI Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. In spite of very healthy fundamental indicators, Bausch Health is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DRI Healthcare and Bausch Health

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

The idea behind DRI Healthcare Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.