Correlation Between Tsingtao Brewery and Bausch Health

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

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

Diversification Opportunities for Tsingtao Brewery and Bausch Health

-0.37

Correlation Coefficient

Tsingtao Brewery  Bausch Health

Very good diversification

The 3 months correlation between Tsingtao and Bausch is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery 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 Tsingtao Brewery 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 Tsingtao Brewery are associated (or correlated) with Bausch Health. 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 Tsingtao Brewery i.e., Tsingtao Brewery and Bausch Health go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Bausch Health

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 3.52 times less return on investment than Bausch Health. But when comparing it to its historical volatility, Tsingtao Brewery is 1.3 times less risky than Bausch Health. It trades about 0.01 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  726.00  in Bausch Health Companies on October 9, 2024 and sell it today you would earn a total of  23.00  from holding Bausch Health Companies or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Tsingtao Brewery  vs.  Bausch Health Companies

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Tsingtao Brewery 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bausch Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tsingtao Brewery and Bausch Health

The main advantage of trading using opposite Tsingtao Brewery and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery position performs unexpectedly, Bausch Health 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 Health will offset losses from the drop in Bausch Health's long position.

The idea behind Tsingtao Brewery 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.