Correlation Between Phibro Animal and Bausch Health

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

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

Diversification Opportunities for Phibro Animal and Bausch Health

0.72

Correlation Coefficient

Phibro Animal  Bausch Health

Poor diversification

The 3 months correlation between Phibro and Bausch is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health 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 Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Bausch Health go up and down completely randomly.

Pair Corralation between Phibro Animal and Bausch Health

Given the investment horizon of 90 days Phibro Animal Health is expected to generate 0.95 times more return on investment than Bausch Health. However, Phibro Animal Health is 1.05 times less risky than Bausch Health. It trades about 0.06 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.04 per unit of risk. If you would invest  1,308  in Phibro Animal Health on August 31, 2024 and sell it today you would earn a total of  1,051  from holding Phibro Animal Health or generate 80.35% return on investment over 90 days.

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

Phibro Animal Health  vs.  Bausch Health Companies

Phibro Animal Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Phibro Animal exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Phibro Animal and Bausch Health

The main advantage of trading using opposite Phibro Animal and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal Health 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.