Correlation Between Ishares Trust and Bausch

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

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

Diversification Opportunities for Ishares Trust and Bausch

-0.07

Correlation Coefficient

Ishares Trust  Bausch

Good diversification

The 3 months correlation between Ishares and Bausch is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust 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 Ishares Trust 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 Ishares Trust 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 Ishares Trust i.e., Ishares Trust and Bausch go up and down completely randomly.

Pair Corralation between Ishares Trust and Bausch

Given the investment horizon of 90 days Ishares Trust is expected to under-perform the Bausch. But the etf apears to be less risky and, when comparing its historical volatility, Ishares Trust is 1.3 times less risky than Bausch. The etf trades about -0.07 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,200  in Bausch Health Companies on December 29, 2024 and sell it today you would earn a total of  175.00  from holding Bausch Health Companies or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Ishares Trust   vs.  Bausch Health Companies

Ishares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ishares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Bausch Health Companies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Ishares Trust and Bausch

The main advantage of trading using opposite Ishares Trust and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Trust 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 Ishares Trust 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.