Correlation Between Bausch Health and Evolus

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

Diversification Opportunities for Bausch Health and Evolus

0.56

Correlation Coefficient

Bausch Health  Evolus

Very weak diversification

The 3 months correlation between Bausch and Evolus is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Evolus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolus 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 Evolus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolus Inc has no effect on the direction of Bausch Health i.e., Bausch Health and Evolus go up and down completely randomly.

Pair Corralation between Bausch Health and Evolus

Considering the 90-day investment horizon Bausch Health is expected to generate 1.15 times less return on investment than Evolus. But when comparing it to its historical volatility, Bausch Health Companies is 1.41 times less risky than Evolus. It trades about 0.1 of its potential returns per unit of risk. Evolus Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  968.00  in Evolus Inc on January 19, 2024 and sell it today you would earn a total of  196.00  from holding Evolus Inc or generate 20.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.78%
Values	Daily Returns

Bausch Health Companies  vs.  Evolus Inc

Bausch Health Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical indicators, Bausch Health may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Evolus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Evolus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bausch Health and Evolus

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

The idea behind Bausch Health Companies and Evolus 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.