Correlation Between NOV and Bausch Health

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

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

Diversification Opportunities for NOV and Bausch Health

0.43

Correlation Coefficient

NOV  Bausch Health

Very weak diversification

The 3 months correlation between NOV and Bausch is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc 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 NOV 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 NOV Inc 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 NOV i.e., NOV and Bausch Health go up and down completely randomly.

Pair Corralation between NOV and Bausch Health

Assuming the 90 days horizon NOV is expected to generate 1.25 times less return on investment than Bausch Health. But when comparing it to its historical volatility, NOV Inc is 2.31 times less risky than Bausch Health. It trades about 0.03 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  764.00  in Bausch Health Companies on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Bausch Health Companies or generate 0.0% return on investment over 90 days.

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

NOV Inc  vs.  Bausch Health Companies

NOV Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bausch Health Companies

Risk-Adjusted Performance

2 of 100

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 nearly unsteady basic indicators, Bausch Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NOV and Bausch Health

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