Correlation Between Bayer Aktiengesellscha and Bayer AG

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

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

Diversification Opportunities for Bayer Aktiengesellscha and Bayer AG

0.98

Correlation Coefficient

Bayer Aktiengesellscha  Bayer AG

Almost no diversification

The 3 months correlation between Bayer and Bayer is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Bayer Aktiengesellschaft 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 Bayer Aktiengesellscha 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 Bayer Aktiengesellschaft 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 Bayer Aktiengesellscha i.e., Bayer Aktiengesellscha and Bayer AG go up and down completely randomly.

Pair Corralation between Bayer Aktiengesellscha and Bayer AG

Assuming the 90 days trading horizon Bayer Aktiengesellschaft is expected to generate 4.79 times more return on investment than Bayer AG. However, Bayer Aktiengesellscha is 4.79 times more volatile than Bayer AG NA. It trades about 0.07 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.32 per unit of risk. If you would invest  468.00  in Bayer Aktiengesellschaft on October 7, 2024 and sell it today you would earn a total of  20.00  from holding Bayer Aktiengesellschaft or generate 4.27% return on investment over 90 days.

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

Bayer Aktiengesellschaft  vs.  Bayer AG NA

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 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 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. 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.

Pair Trading with Bayer Aktiengesellscha and Bayer AG

The main advantage of trading using opposite Bayer Aktiengesellscha and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer Aktiengesellscha 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 Bayer Aktiengesellschaft 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.