Correlation Between Visa and Bausch

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

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

Diversification Opportunities for Visa and Bausch

0.43

Correlation Coefficient

Visa  Bausch

Very weak diversification

The 3 months correlation between Visa and Bausch is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Bausch go up and down completely randomly.

Pair Corralation between Visa and Bausch

Taking into account the 90-day investment horizon Visa is expected to generate 32.22 times less return on investment than Bausch. But when comparing it to its historical volatility, Visa Class A is 51.89 times less risky than Bausch. It trades about 0.07 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,109  in Bausch Health Companies on October 11, 2024 and sell it today you would lose (709.00) from holding Bausch Health Companies or give up 9.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	74.95%
Values	Daily Returns

Visa Class A  vs.  Bausch Health Companies

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

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 fragile 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.

Pair Trading with Visa and Bausch

The main advantage of trading using opposite Visa and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.