Correlation Between Neurocrine Biosciences and Bausch Health

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

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

Diversification Opportunities for Neurocrine Biosciences and Bausch Health

0.59

Correlation Coefficient

Neurocrine Biosciences  Bausch Health

Very weak diversification

The 3 months correlation between Neurocrine and Bausch is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Neurocrine Biosciences 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 Neurocrine Biosciences 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 Neurocrine Biosciences 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 Neurocrine Biosciences i.e., Neurocrine Biosciences and Bausch Health go up and down completely randomly.

Pair Corralation between Neurocrine Biosciences and Bausch Health

Given the investment horizon of 90 days Neurocrine Biosciences is expected to under-perform the Bausch Health. But the stock apears to be less risky and, when comparing its historical volatility, Neurocrine Biosciences is 1.03 times less risky than Bausch Health. The stock trades about -0.1 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  773.00  in Bausch Health Companies on December 30, 2024 and sell it today you would lose (125.00) from holding Bausch Health Companies or give up 16.17% of portfolio value over 90 days.

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

Neurocrine Biosciences  vs.  Bausch Health Companies

Neurocrine Biosciences

Risk-Adjusted Performance

Very Weak

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

Bausch Health Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical 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.

Pair Trading with Neurocrine Biosciences and Bausch Health

The main advantage of trading using opposite Neurocrine Biosciences and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neurocrine Biosciences 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 Neurocrine Biosciences 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.