Correlation Between Bausch Health and Evoke Pharma

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

Diversification Opportunities for Bausch Health and Evoke Pharma

-0.24

Correlation Coefficient

Bausch Health  Evoke Pharma

Very good diversification

The 3 months correlation between Bausch and Evoke is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Evoke Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoke Pharma 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 Evoke Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoke Pharma has no effect on the direction of Bausch Health i.e., Bausch Health and Evoke Pharma go up and down completely randomly.

Pair Corralation between Bausch Health and Evoke Pharma

Considering the 90-day investment horizon Bausch Health Companies is expected to generate 0.48 times more return on investment than Evoke Pharma. However, Bausch Health Companies is 2.08 times less risky than Evoke Pharma. It trades about -0.14 of its potential returns per unit of risk. Evoke Pharma is currently generating about -0.18 per unit of risk. If you would invest  948.00  in Bausch Health Companies on January 25, 2024 and sell it today you would lose (92.00) from holding Bausch Health Companies or give up 9.7% of portfolio value over 90 days.

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

Bausch Health Companies  vs.  Evoke Pharma

Bausch Health Companies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Bausch Health may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Evoke Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evoke Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bausch Health and Evoke Pharma

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

The idea behind Bausch Health Companies and Evoke Pharma 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 Commodity Directory module to find actively traded commodities issued by global exchanges.