Correlation Between Pearson PLC and Bausch

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

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

Diversification Opportunities for Pearson PLC and Bausch

0.0

Correlation Coefficient

Pearson PLC  Bausch

Pay attention - limited upside

The 3 months correlation between Pearson and Bausch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR 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 Pearson PLC 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 Pearson PLC ADR 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 Pearson PLC i.e., Pearson PLC and Bausch go up and down completely randomly.

Pair Corralation between Pearson PLC and Bausch

If you would invest  1,330  in Pearson PLC ADR on October 10, 2024 and sell it today you would earn a total of  304.00  from holding Pearson PLC ADR or generate 22.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Pearson PLC ADR  vs.  Bausch Health Companies

Pearson PLC ADR

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Pearson PLC and Bausch

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