Correlation Between Bausch Health and NextCure

Can any of the company-specific risk be diversified away by investing in both Bausch Health and NextCure 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 NextCure 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 NextCure, you can compare the effects of market volatilities on Bausch Health and NextCure 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 NextCure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and NextCure.

Diversification Opportunities for Bausch Health and NextCure

-0.41

Correlation Coefficient

Bausch Health  NextCure

Very good diversification

The 3 months correlation between Bausch and NextCure is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure 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 NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Bausch Health i.e., Bausch Health and NextCure go up and down completely randomly.

Pair Corralation between Bausch Health and NextCure

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.89 times more return on investment than NextCure. However, Bausch Health Companies is 1.13 times less risky than NextCure. It trades about 0.17 of its potential returns per unit of risk. NextCure is currently generating about -0.09 per unit of risk. If you would invest  607.00  in Bausch Health Companies on September 2, 2024 and sell it today you would earn a total of  230.00  from holding Bausch Health Companies or generate 37.89% return on investment over 90 days.

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

Bausch Health Companies  vs.  NextCure

Bausch Health Companies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bausch Health and NextCure

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

The idea behind Bausch Health Companies and NextCure 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.