Correlation Between Bausch Lomb and Franklin Wireless

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

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

Diversification Opportunities for Bausch Lomb and Franklin Wireless

0.06

Correlation Coefficient

Bausch Lomb  Franklin Wireless

Significant diversification

The 3 months correlation between Bausch and Franklin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Lomb Corp and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp and Bausch Lomb 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 Lomb Corp are associated (or correlated) with Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Bausch Lomb i.e., Bausch Lomb and Franklin Wireless go up and down completely randomly.

Pair Corralation between Bausch Lomb and Franklin Wireless

Given the investment horizon of 90 days Bausch Lomb Corp is expected to generate 1.22 times more return on investment than Franklin Wireless. However, Bausch Lomb is 1.22 times more volatile than Franklin Wireless Corp. It trades about 0.17 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.05 per unit of risk. If you would invest  1,582  in Bausch Lomb Corp on September 11, 2024 and sell it today you would earn a total of  483.00  from holding Bausch Lomb Corp or generate 30.53% return on investment over 90 days.

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

Bausch Lomb Corp  vs.  Franklin Wireless Corp

Bausch Lomb Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Wireless Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Wireless Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Franklin Wireless may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bausch Lomb and Franklin Wireless

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

The idea behind Bausch Lomb Corp and Franklin Wireless Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.