Correlation Between Bayer Aktiengesellscha and Biogen

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

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

Diversification Opportunities for Bayer Aktiengesellscha and Biogen

-0.63

Correlation Coefficient

Bayer Aktiengesellscha  Biogen

Excellent diversification

The 3 months correlation between Bayer and Biogen is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bayer Aktiengesellschaft and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Bayer Aktiengesellscha i.e., Bayer Aktiengesellscha and Biogen go up and down completely randomly.

Pair Corralation between Bayer Aktiengesellscha and Biogen

Assuming the 90 days trading horizon Bayer Aktiengesellschaft is expected to generate 2.2 times more return on investment than Biogen. However, Bayer Aktiengesellscha is 2.2 times more volatile than Biogen Inc. It trades about 0.06 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.06 per unit of risk. If you would invest  496.00  in Bayer Aktiengesellschaft on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Bayer Aktiengesellschaft or generate 12.9% return on investment over 90 days.

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

Bayer Aktiengesellschaft  vs.  Biogen Inc

Bayer Aktiengesellschaft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bayer Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bayer Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Biogen Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bayer Aktiengesellscha and Biogen

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

The idea behind Bayer Aktiengesellschaft and Biogen Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.