Correlation Between Interpublic Group and Bausch

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

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

Diversification Opportunities for Interpublic Group and Bausch

-0.54

Correlation Coefficient

Interpublic Group  Bausch

Excellent diversification

The 3 months correlation between Interpublic and Bausch is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Interpublic Group of 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 Interpublic Group 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 Interpublic Group of 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 Interpublic Group i.e., Interpublic Group and Bausch go up and down completely randomly.

Pair Corralation between Interpublic Group and Bausch

Considering the 90-day investment horizon Interpublic Group of is expected to generate 0.59 times more return on investment than Bausch. However, Interpublic Group of is 1.71 times less risky than Bausch. It trades about -0.43 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.71 per unit of risk. If you would invest  3,030  in Interpublic Group of on October 10, 2024 and sell it today you would lose (260.00) from holding Interpublic Group of or give up 8.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.0%
Values	Daily Returns

Interpublic Group of  vs.  Bausch Health Companies

Interpublic Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interpublic Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Bausch Health Companies

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Interpublic Group and Bausch

The main advantage of trading using opposite Interpublic Group and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interpublic Group 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 Interpublic Group of 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.