Correlation Between Bayer AG and Focus Home

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

Diversification Opportunities for Bayer AG and Focus Home

0.16

Correlation Coefficient

Bayer AG  Focus Home

Average diversification

The 3 months correlation between Bayer and Focus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of Bayer AG i.e., Bayer AG and Focus Home go up and down completely randomly.

Pair Corralation between Bayer AG and Focus Home

Assuming the 90 days trading horizon Bayer AG NA is expected to generate 0.47 times more return on investment than Focus Home. However, Bayer AG NA is 2.15 times less risky than Focus Home. It trades about 0.31 of its potential returns per unit of risk. Focus Home Interactive is currently generating about 0.11 per unit of risk. If you would invest  1,889  in Bayer AG NA on October 24, 2024 and sell it today you would earn a total of  210.00  from holding Bayer AG NA or generate 11.12% return on investment over 90 days.

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

Bayer AG NA  vs.  Focus Home Interactive

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Focus Home Interactive

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Home Interactive are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bayer AG and Focus Home

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

The idea behind Bayer AG NA and Focus Home Interactive 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.