Correlation Between INC Research and Bausch Health

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

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

Diversification Opportunities for INC Research and Bausch Health

-0.67

Correlation Coefficient

INC Research  Bausch Health

Excellent diversification

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

Pair Corralation between INC Research and Bausch Health

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Bausch Health. In addition to that, INC Research is 1.42 times more volatile than Bausch Health Companies. It trades about -0.13 of its total potential returns per unit of risk. Bausch Health Companies is currently generating about 0.16 per unit of volatility. If you would invest  607.00  in Bausch Health Companies on August 31, 2024 and sell it today you would earn a total of  205.00  from holding Bausch Health Companies or generate 33.77% return on investment over 90 days.

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

INC Research Holdings  vs.  Bausch Health Companies

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Bausch Health Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INC Research and Bausch Health

The main advantage of trading using opposite INC Research and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INC Research 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 INC Research Holdings 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 Stocks Directory module to find actively traded stocks across global markets.