Correlation Between U Power and Bausch

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

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

Diversification Opportunities for U Power and Bausch

-0.09

Correlation Coefficient

U Power  Bausch

Good diversification

The 3 months correlation between UCAR and Bausch is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited 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 U Power 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 U Power Limited 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 U Power i.e., U Power and Bausch go up and down completely randomly.

Pair Corralation between U Power and Bausch

Given the investment horizon of 90 days U Power is expected to generate 1.62 times less return on investment than Bausch. But when comparing it to its historical volatility, U Power Limited is 1.15 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  4,276  in Bausch Health Companies on September 28, 2024 and sell it today you would earn a total of  1,933  from holding Bausch Health Companies or generate 45.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.0%
Values	Daily Returns

U Power Limited  vs.  Bausch Health Companies

U Power Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, U Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 somewhat strong basic indicators, Bausch is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with U Power and Bausch

The main advantage of trading using opposite U Power and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power 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 U Power Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.