Correlation Between Bausch Health and Home Depot
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Bausch Health and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Home Depot.
Diversification Opportunities for Bausch Health and Home Depot
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bausch and Home is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Bausch Health i.e., Bausch Health and Home Depot go up and down completely randomly.
Pair Corralation between Bausch Health and Home Depot
Considering the 90-day investment horizon Bausch Health Companies is expected to generate 1.96 times more return on investment than Home Depot. However, Bausch Health is 1.96 times more volatile than Home Depot. It trades about -0.16 of its potential returns per unit of risk. Home Depot is currently generating about -0.46 per unit of risk. If you would invest 959.00 in Bausch Health Companies on January 20, 2024 and sell it today you would lose (99.00) from holding Bausch Health Companies or give up 10.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bausch Health Companies vs. Home Depot
Performance |
| Timeline |
| Bausch Health Companies |
| Home Depot |
Bausch Health and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Home Depot
The main advantage of trading using opposite Bausch Health and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Bausch Health vs. Alkermes Plc | Bausch Health vs. Ironwood Pharmaceuticals | Bausch Health vs. Deciphera Pharmaceuticals LLC | Bausch Health vs. Eagle Pharmaceuticals |
| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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