Correlation Between HEALTHSTREAM (HL5SG) and Bausch Health

Can any of the company-specific risk be diversified away by investing in both HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) and Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HEALTHSTREAM and Bausch Health Companies, you can compare the effects of market volatilities on HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM (HL5SG) with a short position of Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEALTHSTREAM (HL5SG) and Bausch Health.

Diversification Opportunities for HEALTHSTREAM (HL5SG) and Bausch Health

0.0

Correlation Coefficient

HEALTHSTREAM (HL5SG)  Bausch Health

Pay attention - limited upside

The 3 months correlation between HEALTHSTREAM and Bausch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 HEALTHSTREAM (HL5SG) i.e., HEALTHSTREAM (HL5SG) and Bausch Health go up and down completely randomly.

Pair Corralation between HEALTHSTREAM (HL5SG) and Bausch Health

Assuming the 90 days trading horizon HEALTHSTREAM is expected to generate 0.45 times more return on investment than Bausch Health. However, HEALTHSTREAM is 2.2 times less risky than Bausch Health. It trades about -0.06 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.05 per unit of risk. If you would invest  3,057  in HEALTHSTREAM on December 25, 2024 and sell it today you would lose (157.00) from holding HEALTHSTREAM or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HEALTHSTREAM  vs.  Bausch Health Companies

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEALTHSTREAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HEALTHSTREAM (HL5SG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HEALTHSTREAM (HL5SG) and Bausch Health

The main advantage of trading using opposite HEALTHSTREAM (HL5SG) and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEALTHSTREAM (HL5SG) 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 HEALTHSTREAM 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.