Correlation Between Bausch and Teradyne

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

Diversification Opportunities for Bausch and Teradyne

0.19

Correlation Coefficient

Bausch  Teradyne

Average diversification

The 3 months correlation between Bausch and Teradyne is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Bausch i.e., Bausch and Teradyne go up and down completely randomly.

Pair Corralation between Bausch and Teradyne

Assuming the 90 days trading horizon Bausch Health Companies is expected to under-perform the Teradyne. In addition to that, Bausch is 2.35 times more volatile than Teradyne. It trades about -0.11 of its total potential returns per unit of risk. Teradyne is currently generating about 0.08 per unit of volatility. If you would invest  12,429  in Teradyne on October 23, 2024 and sell it today you would earn a total of  1,411  from holding Teradyne or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	53.33%
Values	Daily Returns

Bausch Health Companies  vs.  Teradyne

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.

Teradyne

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch and Teradyne

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

The idea behind Bausch Health Companies and Teradyne 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.