Correlation Between Eton Pharmaceuticals and Bausch Health

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

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

Diversification Opportunities for Eton Pharmaceuticals and Bausch Health

-0.41

Correlation Coefficient

Eton Pharmaceuticals  Bausch Health

Very good diversification

The 3 months correlation between Eton and Bausch is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals 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 Eton Pharmaceuticals 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 Eton Pharmaceuticals 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 Eton Pharmaceuticals i.e., Eton Pharmaceuticals and Bausch Health go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and Bausch Health

Given the investment horizon of 90 days Eton Pharmaceuticals is expected to generate 1.66 times more return on investment than Bausch Health. However, Eton Pharmaceuticals is 1.66 times more volatile than Bausch Health Companies. It trades about 0.03 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.06 per unit of risk. If you would invest  1,305  in Eton Pharmaceuticals on December 27, 2024 and sell it today you would earn a total of  37.00  from holding Eton Pharmaceuticals or generate 2.84% return on investment over 90 days.

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

Eton Pharmaceuticals  vs.  Bausch Health Companies

Eton Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 weak 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 Eton Pharmaceuticals and Bausch Health

The main advantage of trading using opposite Eton Pharmaceuticals and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eton Pharmaceuticals 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 Eton Pharmaceuticals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.