Correlation Between Bausch Health and BioLineRx

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

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

Diversification Opportunities for Bausch Health and BioLineRx

-0.61

Correlation Coefficient

Bausch Health  BioLineRx

Excellent diversification

The 3 months correlation between Bausch and BioLineRx is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and BioLineRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLineRx and Bausch Health 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 Bausch Health Companies are associated (or correlated) with BioLineRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLineRx has no effect on the direction of Bausch Health i.e., Bausch Health and BioLineRx go up and down completely randomly.

Pair Corralation between Bausch Health and BioLineRx

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.46 times more return on investment than BioLineRx. However, Bausch Health Companies is 2.19 times less risky than BioLineRx. It trades about 0.16 of its potential returns per unit of risk. BioLineRx is currently generating about -0.13 per unit of risk. If you would invest  607.00  in Bausch Health Companies on August 31, 2024 and sell it today you would earn a total of  205.00  from holding Bausch Health Companies or generate 33.77% return on investment over 90 days.

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

Bausch Health Companies  vs.  BioLineRx

Bausch Health Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

BioLineRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BioLineRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bausch Health and BioLineRx

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

The idea behind Bausch Health Companies and BioLineRx 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 Transaction History module to view history of all your transactions and understand their impact on performance.