Correlation Between Stellar and Bausch

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

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

Diversification Opportunities for Stellar and Bausch

-0.27

Correlation Coefficient

Stellar  Bausch

Very good diversification

The 3 months correlation between Stellar and Bausch is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Stellar 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 Stellar 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 Stellar 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 Stellar i.e., Stellar and Bausch go up and down completely randomly.

Pair Corralation between Stellar and Bausch

Assuming the 90 days trading horizon Stellar is expected to under-perform the Bausch. In addition to that, Stellar is 2.32 times more volatile than Bausch Health Companies. It trades about -0.05 of its total potential returns per unit of risk. Bausch Health Companies is currently generating about 0.03 per unit of volatility. If you would invest  6,275  in Bausch Health Companies on December 24, 2024 and sell it today you would earn a total of  100.00  from holding Bausch Health Companies or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.25%
Values	Daily Returns

Stellar  vs.  Bausch Health Companies

Stellar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Stellar shareholders.

Bausch Health Companies

Risk-Adjusted Performance

Weak

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

Pair Trading with Stellar and Bausch

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

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.