Correlation Between Hewlett Packard and Bausch

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

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

Diversification Opportunities for Hewlett Packard and Bausch

-0.67

Correlation Coefficient

Hewlett Packard  Bausch

Excellent diversification

The 3 months correlation between Hewlett and Bausch is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise 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 Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and Bausch go up and down completely randomly.

Pair Corralation between Hewlett Packard and Bausch

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to under-perform the Bausch. But the stock apears to be less risky and, when comparing its historical volatility, Hewlett Packard Enterprise is 1.18 times less risky than Bausch. The stock trades about -0.14 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,209  in Bausch Health Companies on December 25, 2024 and sell it today you would lose (34.00) from holding Bausch Health Companies or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.75%
Values	Daily Returns

Hewlett Packard Enterprise  vs.  Bausch Health Companies

Hewlett Packard Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bausch Health Companies

Risk-Adjusted Performance

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 Hewlett Packard and Bausch

The main advantage of trading using opposite Hewlett Packard and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.