Correlation Between JD Sports and Bausch

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

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

Diversification Opportunities for JD Sports and Bausch

-0.58

Correlation Coefficient

JD Sports  Bausch

Excellent diversification

The 3 months correlation between JDSPY and Bausch is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion 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 JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and Bausch go up and down completely randomly.

Pair Corralation between JD Sports and Bausch

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Bausch. In addition to that, JD Sports is 2.64 times more volatile than Bausch Health Companies. It trades about -0.05 of its total potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 per unit of volatility. If you would invest  6,275  in Bausch Health Companies on October 16, 2024 and sell it today you would earn a total of  28.00  from holding Bausch Health Companies or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

JD Sports Fashion  vs.  Bausch Health Companies

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bausch Health Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 4 (%) 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 JD Sports and Bausch

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