Correlation Between Design Therapeutics and Bausch

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

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

Diversification Opportunities for Design Therapeutics and Bausch

0.66

Correlation Coefficient

Design Therapeutics  Bausch

Poor diversification

The 3 months correlation between Design and Bausch is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics 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 Design Therapeutics 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 Design Therapeutics 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 Design Therapeutics i.e., Design Therapeutics and Bausch go up and down completely randomly.

Pair Corralation between Design Therapeutics and Bausch

Given the investment horizon of 90 days Design Therapeutics is expected to generate 1.03 times more return on investment than Bausch. However, Design Therapeutics is 1.03 times more volatile than Bausch Health Companies. It trades about 0.05 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.01 per unit of risk. If you would invest  379.00  in Design Therapeutics on October 12, 2024 and sell it today you would earn a total of  128.50  from holding Design Therapeutics or generate 33.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	39.36%
Values	Daily Returns

Design Therapeutics  vs.  Bausch Health Companies

Design Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak 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 Design Therapeutics and Bausch

The main advantage of trading using opposite Design Therapeutics and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design Therapeutics 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 Design Therapeutics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.