Correlation Between Bayer AG and Allianz SE

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

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

Diversification Opportunities for Bayer AG and Allianz SE

0.82

Correlation Coefficient

Bayer AG  Allianz SE

Very poor diversification

The 3 months correlation between Bayer and Allianz is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Allianz SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz SE and Bayer AG 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 AG NA are associated (or correlated) with Allianz SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz SE has no effect on the direction of Bayer AG i.e., Bayer AG and Allianz SE go up and down completely randomly.

Pair Corralation between Bayer AG and Allianz SE

Assuming the 90 days trading horizon Bayer AG is expected to generate 1.13 times less return on investment than Allianz SE. In addition to that, Bayer AG is 2.55 times more volatile than Allianz SE. It trades about 0.11 of its total potential returns per unit of risk. Allianz SE is currently generating about 0.33 per unit of volatility. If you would invest  29,560  in Allianz SE on December 30, 2024 and sell it today you would earn a total of  6,210  from holding Allianz SE or generate 21.01% return on investment over 90 days.

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

Bayer AG NA  vs.  Allianz SE

Bayer AG NA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bayer AG NA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bayer AG reported solid returns over the last few months and may actually be approaching a breakup point.

Allianz SE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz SE are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Allianz SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayer AG and Allianz SE

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

The idea behind Bayer AG NA and Allianz SE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.