Correlation Between Bausch Health and Alimera Sciences

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

Diversification Opportunities for Bausch Health and Alimera Sciences

0.8

Correlation Coefficient

Bausch Health  Alimera Sciences

Very poor diversification

The 3 months correlation between Bausch and Alimera is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Alimera Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimera Sciences 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 Alimera Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimera Sciences has no effect on the direction of Bausch Health i.e., Bausch Health and Alimera Sciences go up and down completely randomly.

Pair Corralation between Bausch Health and Alimera Sciences

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Alimera Sciences. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.32 times less risky than Alimera Sciences. The stock trades about -0.59 of its potential returns per unit of risk. The Alimera Sciences is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  346.00  in Alimera Sciences on March 2, 2024 and sell it today you would lose (32.00) from holding Alimera Sciences or give up 9.25% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Alimera Sciences

Bausch Health Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Health Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bausch Health and Alimera Sciences

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

The idea behind Bausch Health Companies and Alimera Sciences 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.