Correlation Between Exxon and Bausch

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

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

Diversification Opportunities for Exxon and Bausch

0.18

Correlation Coefficient

Exxon  Bausch

Average diversification

The 3 months correlation between Exxon and Bausch is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and Bausch go up and down completely randomly.

Pair Corralation between Exxon and Bausch

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.51 times more return on investment than Bausch. However, Exxon Mobil Corp is 1.96 times less risky than Bausch. It trades about -0.34 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.28 per unit of risk. If you would invest  12,048  in Exxon Mobil Corp on September 14, 2024 and sell it today you would lose (866.00) from holding Exxon Mobil Corp or give up 7.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Exxon Mobil Corp  vs.  Bausch Health Companies

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Bausch Health Companies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 3 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Bausch

The main advantage of trading using opposite Exxon and Bausch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.