Correlation Between Bausch Health and Viatris

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

Diversification Opportunities for Bausch Health and Viatris

0.24

Correlation Coefficient

Bausch Health  Viatris

Modest diversification

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

Pair Corralation between Bausch Health and Viatris

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Viatris. In addition to that, Bausch Health is 2.38 times more volatile than Viatris. It trades about -0.3 of its total potential returns per unit of risk. Viatris is currently generating about -0.12 per unit of volatility. If you would invest  1,297  in Viatris on September 12, 2024 and sell it today you would lose (46.00) from holding Viatris or give up 3.55% 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.  Viatris

Bausch Health Companies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Health Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Bausch Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Viatris

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bausch Health and Viatris

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

The idea behind Bausch Health Companies and Viatris 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.