Correlation Between Gap, and Bausch

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

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

Diversification Opportunities for Gap, and Bausch

0.35

Correlation Coefficient

Gap,  Bausch

Weak diversification

The 3 months correlation between Gap, and Bausch is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, 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 Gap, 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 The Gap, 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 Gap, i.e., Gap, and Bausch go up and down completely randomly.

Pair Corralation between Gap, and Bausch

Considering the 90-day investment horizon The Gap, is expected to under-perform the Bausch. But the stock apears to be less risky and, when comparing its historical volatility, The Gap, is 9.63 times less risky than Bausch. The stock trades about -0.02 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,175  in Bausch Health Companies on October 20, 2024 and sell it today you would earn a total of  128.00  from holding Bausch Health Companies or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.0%
Values	Daily Returns

The Gap,  vs.  Bausch Health Companies

Gap,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bausch Health Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bausch sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gap, and Bausch

The main advantage of trading using opposite Gap, and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.