Correlation Between National Research and Bausch Lomb

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

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

Diversification Opportunities for National Research and Bausch Lomb

0.75

Correlation Coefficient

National Research  Bausch Lomb

Poor diversification

The 3 months correlation between National and Bausch is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Research Corp 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 National Research 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 National Research Corp 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 National Research i.e., National Research and Bausch Lomb go up and down completely randomly.

Pair Corralation between National Research and Bausch Lomb

Considering the 90-day investment horizon National Research Corp is expected to under-perform the Bausch Lomb. In addition to that, National Research is 1.3 times more volatile than Bausch Lomb Corp. It trades about -0.12 of its total potential returns per unit of risk. Bausch Lomb Corp is currently generating about -0.11 per unit of volatility. If you would invest  1,760  in Bausch Lomb Corp on February 23, 2024 and sell it today you would lose (290.00) from holding Bausch Lomb Corp or give up 16.48% of portfolio value over 90 days.

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

National Research Corp  vs.  Bausch Lomb Corp

National Research Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Research Corp 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 basic 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.

Bausch Lomb Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bausch Lomb Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with National Research and Bausch Lomb

The main advantage of trading using opposite National Research and Bausch Lomb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Research 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 National Research Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.