Correlation Between Bausch Health and STELLA-JONES INC

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

Diversification Opportunities for Bausch Health and STELLA-JONES INC

-0.6

Correlation Coefficient

Bausch Health  STELLA-JONES INC

Excellent diversification

The 3 months correlation between Bausch and STELLA-JONES is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC 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 STELLA-JONES INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Bausch Health i.e., Bausch Health and STELLA-JONES INC go up and down completely randomly.

Pair Corralation between Bausch Health and STELLA-JONES INC

Assuming the 90 days horizon Bausch Health Companies is expected to under-perform the STELLA-JONES INC. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.17 times less risky than STELLA-JONES INC. The stock trades about -0.33 of its potential returns per unit of risk. The STELLA JONES INC is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  5,567  in STELLA JONES INC on September 5, 2024 and sell it today you would lose (867.00) from holding STELLA JONES INC or give up 15.57% 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.  STELLA JONES INC

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. Despite nearly fragile basic indicators, Bausch Health reported solid returns over the last few months and may actually be approaching a breakup point.

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bausch Health and STELLA-JONES INC

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

The idea behind Bausch Health Companies and STELLA JONES INC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.