Correlation Between Catalent and Bausch Health

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

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

Diversification Opportunities for Catalent and Bausch Health

-0.27

Correlation Coefficient

Catalent  Bausch Health

Very good diversification

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

Pair Corralation between Catalent and Bausch Health

Assuming the 90 days horizon Catalent is expected to generate 0.23 times more return on investment than Bausch Health. However, Catalent is 4.3 times less risky than Bausch Health. It trades about 0.24 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.07 per unit of risk. If you would invest  5,799  in Catalent on September 27, 2024 and sell it today you would earn a total of  194.00  from holding Catalent or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Catalent  vs.  Bausch Health Companies

Catalent

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 nearly stable basic indicators, Bausch Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Catalent and Bausch Health

The main advantage of trading using opposite Catalent and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.