Correlation Between Clarkson PLC and Bayer AG

Can any of the company-specific risk be diversified away by investing in both Clarkson PLC and Bayer AG 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 Clarkson PLC and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clarkson PLC and Bayer AG NA, you can compare the effects of market volatilities on Clarkson PLC and Bayer AG 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 Clarkson PLC with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clarkson PLC and Bayer AG.

Diversification Opportunities for Clarkson PLC and Bayer AG

-0.65

Correlation Coefficient

Clarkson PLC  Bayer AG

Excellent diversification

The 3 months correlation between Clarkson and Bayer is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Clarkson PLC and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA and Clarkson PLC 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 Clarkson PLC are associated (or correlated) with Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG NA has no effect on the direction of Clarkson PLC i.e., Clarkson PLC and Bayer AG go up and down completely randomly.

Pair Corralation between Clarkson PLC and Bayer AG

Assuming the 90 days horizon Clarkson PLC is expected to generate 0.74 times more return on investment than Bayer AG. However, Clarkson PLC is 1.36 times less risky than Bayer AG. It trades about 0.07 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.24 per unit of risk. If you would invest  4,400  in Clarkson PLC on September 23, 2024 and sell it today you would earn a total of  360.00  from holding Clarkson PLC or generate 8.18% return on investment over 90 days.

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

Clarkson PLC  vs.  Bayer AG NA

Clarkson PLC

Risk-Adjusted Performance

5 of 100

Modest

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

Bayer AG NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Clarkson PLC and Bayer AG

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

The idea behind Clarkson PLC and Bayer AG NA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.