Correlation Between Flexible Solutions and Bausch

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

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

Diversification Opportunities for Flexible Solutions and Bausch

0.51

Correlation Coefficient

Flexible Solutions  Bausch

Very weak diversification

The 3 months correlation between Flexible and Bausch is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation 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 Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and Bausch go up and down completely randomly.

Pair Corralation between Flexible Solutions and Bausch

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 1.13 times more return on investment than Bausch. However, Flexible Solutions is 1.13 times more volatile than Bausch Health Companies. It trades about 0.11 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.11 per unit of risk. If you would invest  154.00  in Flexible Solutions International on September 27, 2024 and sell it today you would earn a total of  202.00  from holding Flexible Solutions International or generate 131.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.18%
Values	Daily Returns

Flexible Solutions Internation  vs.  Bausch Health Companies

Flexible Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flexible Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Flexible Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 somewhat strong basic indicators, Bausch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Flexible Solutions and Bausch

The main advantage of trading using opposite Flexible Solutions and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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 Flexible Solutions International 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.