Correlation Between CHAR Technologies and Bausch Health

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

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

Diversification Opportunities for CHAR Technologies and Bausch Health

0.03

Correlation Coefficient

CHAR Technologies  Bausch Health

Significant diversification

The 3 months correlation between CHAR and Bausch is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CHAR Technologies 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 CHAR Technologies 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 CHAR Technologies are associated (or correlated) with Bausch Health. 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 CHAR Technologies i.e., CHAR Technologies and Bausch Health go up and down completely randomly.

Pair Corralation between CHAR Technologies and Bausch Health

Assuming the 90 days horizon CHAR Technologies is expected to generate 1.78 times more return on investment than Bausch Health. However, CHAR Technologies is 1.78 times more volatile than Bausch Health Companies. It trades about 0.07 of its potential returns per unit of risk. Bausch Health Companies is currently generating about 0.02 per unit of risk. If you would invest  20.00  in CHAR Technologies on October 4, 2024 and sell it today you would earn a total of  1.00  from holding CHAR Technologies or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CHAR Technologies  vs.  Bausch Health Companies

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHAR Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bausch Health Companies

Risk-Adjusted Performance

1 of 100

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. In spite of very healthy fundamental indicators, Bausch Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CHAR Technologies and Bausch Health

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

The idea behind CHAR Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.