Correlation Between Bausch and Playtika Holding

Can any of the company-specific risk be diversified away by investing in both Bausch and Playtika Holding 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 Playtika Holding 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 Playtika Holding Corp, you can compare the effects of market volatilities on Bausch and Playtika Holding 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 Playtika Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch and Playtika Holding.

Diversification Opportunities for Bausch and Playtika Holding

-0.11

Correlation Coefficient

Bausch  Playtika Holding

Good diversification

The 3 months correlation between Bausch and Playtika is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Playtika Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtika Holding Corp 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 Playtika Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtika Holding Corp has no effect on the direction of Bausch i.e., Bausch and Playtika Holding go up and down completely randomly.

Pair Corralation between Bausch and Playtika Holding

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the Playtika Holding. But the bond apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.39 times less risky than Playtika Holding. The bond trades about -0.71 of its potential returns per unit of risk. The Playtika Holding Corp is currently generating about -0.39 of returns per unit of risk over similar time horizon. If you would invest  861.00  in Playtika Holding Corp on October 9, 2024 and sell it today you would lose (154.00) from holding Playtika Holding Corp or give up 17.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.0%
Values	Daily Returns

Bausch Health Companies  vs.  Playtika Holding Corp

Bausch Health Companies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Bausch may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Playtika Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtika Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Playtika Holding is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bausch and Playtika Holding

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

The idea behind Bausch Health Companies and Playtika Holding Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.