Correlation Between Bayer AG and Bayer Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both Bayer AG 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 Bayer AG and Bayer Aktiengesellscha 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 Bayer Aktiengesellschaft, you can compare the effects of market volatilities on Bayer AG 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 Bayer AG with a short position of Bayer Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Bayer Aktiengesellscha.

Diversification Opportunities for Bayer AG and Bayer Aktiengesellscha

0.98

Correlation Coefficient

Bayer AG  Bayer Aktiengesellscha

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 AG NA and Bayer Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer Aktiengesellschaft 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 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 Bayer AG i.e., Bayer AG and Bayer Aktiengesellscha go up and down completely randomly.

Pair Corralation between Bayer AG and Bayer Aktiengesellscha

Assuming the 90 days trading horizon Bayer AG NA is expected to under-perform the Bayer Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, Bayer AG NA is 4.79 times less risky than Bayer Aktiengesellscha. The stock trades about -0.32 of its potential returns per unit of risk. The Bayer Aktiengesellschaft is currently generating about 0.07 of returns per unit of risk over similar time horizon. 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 AG NA  vs.  Bayer Aktiengesellschaft

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.

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.

Pair Trading with Bayer AG and Bayer Aktiengesellscha

The main advantage of trading using opposite Bayer AG and Bayer Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG 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 Bayer AG NA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.