Correlation Between Bausch and NETGEAR

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

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

Diversification Opportunities for Bausch and NETGEAR

-0.41

Correlation Coefficient

Bausch  NETGEAR

Very good diversification

The 3 months correlation between Bausch and NETGEAR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Bausch 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 Bausch Health Companies are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Bausch i.e., Bausch and NETGEAR go up and down completely randomly.

Pair Corralation between Bausch and NETGEAR

Assuming the 90 days trading horizon Bausch Health Companies is expected to generate 0.95 times more return on investment than NETGEAR. However, Bausch Health Companies is 1.05 times less risky than NETGEAR. It trades about 0.25 of its potential returns per unit of risk. NETGEAR is currently generating about -0.1 per unit of risk. If you would invest  7,130  in Bausch Health Companies on December 24, 2024 and sell it today you would earn a total of  1,020  from holding Bausch Health Companies or generate 14.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	36.07%
Values	Daily Returns

Bausch Health Companies  vs.  NETGEAR

Bausch Health Companies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Bausch sustained solid returns over the last few months and may actually be approaching a breakup point.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bausch and NETGEAR

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

The idea behind Bausch Health Companies and NETGEAR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.