Correlation Between Bausch Health and Senti Biosciences

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

Diversification Opportunities for Bausch Health and Senti Biosciences

-0.63

Correlation Coefficient

Bausch Health  Senti Biosciences

Excellent diversification

The 3 months correlation between Bausch and Senti is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Senti Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senti Biosciences 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 Senti Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senti Biosciences has no effect on the direction of Bausch Health i.e., Bausch Health and Senti Biosciences go up and down completely randomly.

Pair Corralation between Bausch Health and Senti Biosciences

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Senti Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.44 times less risky than Senti Biosciences. The stock trades about -0.31 of its potential returns per unit of risk. The Senti Biosciences is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Senti Biosciences on September 2, 2024 and sell it today you would lose (2.00) from holding Senti Biosciences or give up 0.92% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Senti Biosciences

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.

Senti Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senti Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Bausch Health and Senti Biosciences

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

The idea behind Bausch Health Companies and Senti Biosciences 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.