Correlation Between Bausch Health and Amgen

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

Diversification Opportunities for Bausch Health and Amgen

-0.62

Correlation Coefficient

Bausch Health  Amgen

Excellent diversification

The 3 months correlation between Bausch and Amgen is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Bausch Health i.e., Bausch Health and Amgen go up and down completely randomly.

Pair Corralation between Bausch Health and Amgen

Considering the 90-day investment horizon Bausch Health Companies is expected to under-perform the Amgen. But the stock apears to be less risky and, when comparing its historical volatility, Bausch Health Companies is 1.14 times less risky than Amgen. The stock trades about -0.34 of its potential returns per unit of risk. The Amgen Inc is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  26,551  in Amgen Inc on February 15, 2024 and sell it today you would earn a total of  4,818  from holding Amgen Inc or generate 18.15% return on investment over 90 days.

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

Bausch Health Companies  vs.  Amgen Inc

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 unfluctuating 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.

Amgen Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Amgen may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bausch Health and Amgen

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

The idea behind Bausch Health Companies and Amgen 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.