Correlation Between Bausch and Naked Wines

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

Diversification Opportunities for Bausch and Naked Wines

0.5

Correlation Coefficient

Bausch  Naked Wines

Very weak diversification

The 3 months correlation between Bausch and Naked is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Bausch i.e., Bausch and Naked Wines go up and down completely randomly.

Pair Corralation between Bausch and Naked Wines

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the Naked Wines. In addition to that, Bausch is 5.07 times more volatile than Naked Wines plc. It trades about -0.11 of its total potential returns per unit of risk. Naked Wines plc is currently generating about 0.02 per unit of volatility. If you would invest  252.00  in Naked Wines plc on October 12, 2024 and sell it today you would earn a total of  3.00  from holding Naked Wines plc or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	53.97%
Values	Daily Returns

Bausch Health Companies  vs.  Naked Wines plc

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for Bausch Health Companies investors.

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bausch and Naked Wines

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

The idea behind Bausch Health Companies and Naked Wines plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.