Correlation Between ARDAGH METAL and Bayer Aktiengesellscha

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

By analyzing existing cross correlation between ARDAGH METAL PACDL 0001 and Bayer Aktiengesellschaft, you can compare the effects of market volatilities on ARDAGH METAL and Bayer Aktiengesellscha 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 ARDAGH METAL with a short position of Bayer Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARDAGH METAL and Bayer Aktiengesellscha.

Diversification Opportunities for ARDAGH METAL and Bayer Aktiengesellscha

0.27

Correlation Coefficient

ARDAGH METAL  Bayer Aktiengesellscha

Modest diversification

The 3 months correlation between ARDAGH and Bayer is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ARDAGH METAL PACDL 0001 and Bayer Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer Aktiengesellschaft and ARDAGH METAL 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 ARDAGH METAL PACDL 0001 are associated (or correlated) with Bayer Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer Aktiengesellschaft has no effect on the direction of ARDAGH METAL i.e., ARDAGH METAL and Bayer Aktiengesellscha go up and down completely randomly.

Pair Corralation between ARDAGH METAL and Bayer Aktiengesellscha

Assuming the 90 days horizon ARDAGH METAL PACDL 0001 is expected to under-perform the Bayer Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, ARDAGH METAL PACDL 0001 is 1.29 times less risky than Bayer Aktiengesellscha. The stock trades about -0.08 of its potential returns per unit of risk. The Bayer Aktiengesellschaft is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  615.00  in Bayer Aktiengesellschaft on October 24, 2024 and sell it today you would lose (115.00) from holding Bayer Aktiengesellschaft or give up 18.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

ARDAGH METAL PACDL 0001  vs.  Bayer Aktiengesellschaft

ARDAGH METAL PACDL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARDAGH METAL PACDL 0001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bayer Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ARDAGH METAL and Bayer Aktiengesellscha

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

The idea behind ARDAGH METAL PACDL 0001 and Bayer Aktiengesellschaft 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.