Correlation Between Fidelity Covington and Bausch

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

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

Diversification Opportunities for Fidelity Covington and Bausch

0.13

Correlation Coefficient

Fidelity Covington  Bausch

Average diversification

The 3 months correlation between Fidelity and Bausch is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington 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 Fidelity Covington 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 Fidelity Covington Trust 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 Fidelity Covington i.e., Fidelity Covington and Bausch go up and down completely randomly.

Pair Corralation between Fidelity Covington and Bausch

Given the investment horizon of 90 days Fidelity Covington Trust is expected to generate 0.75 times more return on investment than Bausch. However, Fidelity Covington Trust is 1.34 times less risky than Bausch. It trades about -0.03 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.04 per unit of risk. If you would invest  3,598  in Fidelity Covington Trust on October 10, 2024 and sell it today you would lose (35.00) from holding Fidelity Covington Trust or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Fidelity Covington Trust  vs.  Bausch Health Companies

Fidelity Covington Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Fidelity Covington may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fidelity Covington and Bausch

The main advantage of trading using opposite Fidelity Covington and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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 Fidelity Covington 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.