Correlation Between Saba Capital and Bausch

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

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

Diversification Opportunities for Saba Capital and Bausch

0.78

Correlation Coefficient

Saba Capital  Bausch

Poor diversification

The 3 months correlation between Saba and Bausch is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Saba Capital Income 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 Saba Capital 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 Saba Capital Income 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 Saba Capital i.e., Saba Capital and Bausch go up and down completely randomly.

Pair Corralation between Saba Capital and Bausch

Given the investment horizon of 90 days Saba Capital is expected to generate 119.67 times less return on investment than Bausch. But when comparing it to its historical volatility, Saba Capital Income is 95.67 times less risky than Bausch. It trades about 0.06 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  4,910  in Bausch Health Companies on September 23, 2024 and sell it today you would earn a total of  1,494  from holding Bausch Health Companies or generate 30.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	67.2%
Values	Daily Returns

Saba Capital Income  vs.  Bausch Health Companies

Saba Capital Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saba Capital Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Saba Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bausch Health Companies

Risk-Adjusted Performance

5 of 100

OK

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 unfluctuating basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Saba Capital and Bausch

The main advantage of trading using opposite Saba Capital and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saba Capital 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 Saba Capital Income 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.