Correlation Between TRON and Bausch

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

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

Diversification Opportunities for TRON and Bausch

-0.56

Correlation Coefficient

TRON  Bausch

Excellent diversification

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

Pair Corralation between TRON and Bausch

Assuming the 90 days trading horizon TRON is expected to generate 0.68 times more return on investment than Bausch. However, TRON is 1.47 times less risky than Bausch. It trades about -0.02 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.03 per unit of risk. If you would invest  26.00  in TRON on December 23, 2024 and sell it today you would lose (2.00) from holding TRON or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.77%
Values	Daily Returns

TRON  vs.  Bausch Health Companies

TRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TRON is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bausch Health Companies

Risk-Adjusted Performance

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 latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Bausch Health Companies investors.

Pair Trading with TRON and Bausch

The main advantage of trading using opposite TRON and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON 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 TRON 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.