Correlation Between Palmer Square and Bausch

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

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

Diversification Opportunities for Palmer Square and Bausch

0.56

Correlation Coefficient

Palmer Square  Bausch

Very weak diversification

The 3 months correlation between Palmer and Bausch is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short 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 Palmer Square 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 Palmer Square Ultra Short 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 Palmer Square i.e., Palmer Square and Bausch go up and down completely randomly.

Pair Corralation between Palmer Square and Bausch

Assuming the 90 days horizon Palmer Square Ultra Short is expected to under-perform the Bausch. But the mutual fund apears to be less risky and, when comparing its historical volatility, Palmer Square Ultra Short is 9.66 times less risky than Bausch. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Bausch Health Companies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,053  in Bausch Health Companies on October 10, 2024 and sell it today you would earn a total of  297.00  from holding Bausch Health Companies or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.42%
Values	Daily Returns

Palmer Square Ultra Short  vs.  Bausch Health Companies

Palmer Square Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palmer Square Ultra Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Palmer Square and Bausch

The main advantage of trading using opposite Palmer Square and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ultra Short 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.