Correlation Between ICU Medical and Bausch Lomb

Can any of the company-specific risk be diversified away by investing in both ICU Medical and Bausch Lomb 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 ICU Medical and Bausch Lomb into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICU Medical and Bausch Lomb Corp, you can compare the effects of market volatilities on ICU Medical and Bausch Lomb 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 ICU Medical with a short position of Bausch Lomb. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICU Medical and Bausch Lomb.

Diversification Opportunities for ICU Medical and Bausch Lomb

0.61

Correlation Coefficient

ICU Medical  Bausch Lomb

Poor diversification

The 3 months correlation between ICU and Bausch is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ICU Medical and Bausch Lomb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Lomb Corp and ICU Medical 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 ICU Medical are associated (or correlated) with Bausch Lomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Lomb Corp has no effect on the direction of ICU Medical i.e., ICU Medical and Bausch Lomb go up and down completely randomly.

Pair Corralation between ICU Medical and Bausch Lomb

Given the investment horizon of 90 days ICU Medical is expected to generate 24.25 times less return on investment than Bausch Lomb. But when comparing it to its historical volatility, ICU Medical is 1.13 times less risky than Bausch Lomb. It trades about 0.0 of its potential returns per unit of risk. Bausch Lomb Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Bausch Lomb Corp on July 21, 2024 and sell it today you would earn a total of  63.00  from holding Bausch Lomb Corp or generate 3.15% return on investment over 90 days.

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

ICU Medical  vs.  Bausch Lomb Corp

ICU Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ICU Medical are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, ICU Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bausch Lomb Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICU Medical and Bausch Lomb

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

The idea behind ICU Medical and Bausch Lomb Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..