Correlation Between Invesco SP and Bausch

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

By analyzing existing cross correlation between Invesco SP 500 and Bausch Health Companies, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Bausch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Bausch.

Diversification Opportunities for Invesco SP and Bausch

0.68

Correlation Coefficient

Invesco SP  Bausch

Poor diversification

The 3 months correlation between Invesco and Bausch is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 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 Invesco SP 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 Invesco SP 500 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 Invesco SP i.e., Invesco SP and Bausch go up and down completely randomly.

Pair Corralation between Invesco SP and Bausch

Considering the 90-day investment horizon Invesco SP is expected to generate 1.9 times less return on investment than Bausch. But when comparing it to its historical volatility, Invesco SP 500 is 1.43 times less risky than Bausch. It trades about 0.05 of its potential returns per unit of risk. 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	Significant
Accuracy	77.42%
Values	Daily Returns

Invesco SP 500  vs.  Bausch Health Companies

Invesco SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Invesco SP and Bausch

The main advantage of trading using opposite Invesco SP and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP 500 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.