Correlation Between Bausch Health and Guardion Health

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

Diversification Opportunities for Bausch Health and Guardion Health

0.05

Correlation Coefficient

Bausch Health  Guardion Health

Significant diversification

The 3 months correlation between Bausch and Guardion is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Guardion Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardion Health 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 Guardion Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardion Health Sciences has no effect on the direction of Bausch Health i.e., Bausch Health and Guardion Health go up and down completely randomly.

Pair Corralation between Bausch Health and Guardion Health

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Guardion Health. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.75 times less risky than Guardion Health. The stock trades about -0.65 of its potential returns per unit of risk. The Guardion Health Sciences is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  790.00  in Guardion Health Sciences on March 1, 2024 and sell it today you would earn a total of  135.00  from holding Guardion Health Sciences or generate 17.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bausch Health Companies  vs.  Guardion Health 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 unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Guardion Health Sciences

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guardion Health Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Guardion Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bausch Health and Guardion Health

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

The idea behind Bausch Health Companies and Guardion Health 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.