Correlation Between Great West and Bausch Health

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

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

Diversification Opportunities for Great West and Bausch Health

-0.6

Correlation Coefficient

Great West  Bausch Health

Excellent diversification

The 3 months correlation between Great and Bausch is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco 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 Great West 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 Great West Lifeco 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 Great West i.e., Great West and Bausch Health go up and down completely randomly.

Pair Corralation between Great West and Bausch Health

Assuming the 90 days trading horizon Great West Lifeco is expected to generate 0.18 times more return on investment than Bausch Health. However, Great West Lifeco is 5.56 times less risky than Bausch Health. It trades about 0.17 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  2,129  in Great West Lifeco on December 28, 2024 and sell it today you would earn a total of  120.00  from holding Great West Lifeco or generate 5.64% return on investment over 90 days.

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

Great West Lifeco  vs.  Bausch Health Companies

Great West Lifeco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Great West is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Great West and Bausch Health

The main advantage of trading using opposite Great West and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West 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 Great West Lifeco 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.