Correlation Between Bausch Health and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Bausch Health and Legg Mason 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 Legg Mason 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 Legg Mason Bw, you can compare the effects of market volatilities on Bausch Health and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Legg Mason.
Diversification Opportunities for Bausch Health and Legg Mason
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bausch and Legg is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Bausch Health i.e., Bausch Health and Legg Mason go up and down completely randomly.
Pair Corralation between Bausch Health and Legg Mason
Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Legg Mason. In addition to that, Bausch Health is 4.52 times more volatile than Legg Mason Bw. It trades about -0.1 of its total potential returns per unit of risk. Legg Mason Bw is currently generating about -0.06 per unit of volatility. If you would invest 862.00 in Legg Mason Bw on February 12, 2024 and sell it today you would lose (21.00) from holding Legg Mason Bw or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Legg Mason Bw
Performance |
| Timeline |
| Bausch Health Companies |
| Legg Mason Bw |
Bausch Health and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Legg Mason
The main advantage of trading using opposite Bausch Health and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Bausch Health vs. Viatris | Bausch Health vs. Catalent | Bausch Health vs. Tilray Inc | Bausch Health vs. Zoetis Inc |
| Legg Mason vs. HUMANA INC | Legg Mason vs. Aquagold International | Legg Mason vs. Morningstar Unconstrained Allocation | Legg Mason vs. High Yield Municipal Fund |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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