Correlation Between Bayer Aktiengesellscha and CSPC PHARMACEUTGR

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

By analyzing existing cross correlation between Bayer Aktiengesellschaft and CSPC PHARMACEUTGR ADR4, you can compare the effects of market volatilities on Bayer Aktiengesellscha and CSPC PHARMACEUTGR 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 CSPC PHARMACEUTGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer Aktiengesellscha and CSPC PHARMACEUTGR.

Diversification Opportunities for Bayer Aktiengesellscha and CSPC PHARMACEUTGR

0.21

Correlation Coefficient

Bayer Aktiengesellscha  CSPC PHARMACEUTGR

Modest diversification

The 3 months correlation between Bayer and CSPC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bayer Aktiengesellschaft and CSPC PHARMACEUTGR ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSPC PHARMACEUTGR ADR4 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 CSPC PHARMACEUTGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSPC PHARMACEUTGR ADR4 has no effect on the direction of Bayer Aktiengesellscha i.e., Bayer Aktiengesellscha and CSPC PHARMACEUTGR go up and down completely randomly.

Pair Corralation between Bayer Aktiengesellscha and CSPC PHARMACEUTGR

Assuming the 90 days trading horizon Bayer Aktiengesellschaft is expected to under-perform the CSPC PHARMACEUTGR. But the stock apears to be less risky and, when comparing its historical volatility, Bayer Aktiengesellschaft is 1.42 times less risky than CSPC PHARMACEUTGR. The stock trades about -0.11 of its potential returns per unit of risk. The CSPC PHARMACEUTGR ADR4 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  197.00  in CSPC PHARMACEUTGR ADR4 on September 12, 2024 and sell it today you would earn a total of  27.00  from holding CSPC PHARMACEUTGR ADR4 or generate 13.71% return on investment over 90 days.

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

Bayer Aktiengesellschaft  vs.  CSPC PHARMACEUTGR ADR4

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CSPC PHARMACEUTGR ADR4

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSPC PHARMACEUTGR ADR4 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CSPC PHARMACEUTGR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayer Aktiengesellscha and CSPC PHARMACEUTGR

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

The idea behind Bayer Aktiengesellschaft and CSPC PHARMACEUTGR ADR4 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.