Correlation Between Esperion Therapeutics and Bausch Health

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

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

Diversification Opportunities for Esperion Therapeutics and Bausch Health

0.54

Correlation Coefficient

Esperion Therapeutics  Bausch Health

Very weak diversification

The 3 months correlation between Esperion and Bausch is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Esperion 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 Esperion 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 Esperion Therapeutics 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 Esperion Therapeutics i.e., Esperion Therapeutics and Bausch Health go up and down completely randomly.

Pair Corralation between Esperion Therapeutics and Bausch Health

Given the investment horizon of 90 days Esperion Therapeutics is expected to under-perform the Bausch Health. In addition to that, Esperion Therapeutics is 1.25 times more volatile than Bausch Health Companies. It trades about -0.12 of its total potential returns per unit of risk. Bausch Health Companies is currently generating about -0.06 per unit of volatility. If you would invest  773.00  in Bausch Health Companies on December 29, 2024 and sell it today you would lose (98.00) from holding Bausch Health Companies or give up 12.68% of portfolio value over 90 days.

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

Esperion Therapeutics  vs.  Bausch Health Companies

Esperion Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esperion Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Esperion Therapeutics and Bausch Health

The main advantage of trading using opposite Esperion Therapeutics and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Esperion Therapeutics 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 Esperion 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.