Correlation Between Bayer AG and Rayonier Advanced

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

Diversification Opportunities for Bayer AG and Rayonier Advanced

-0.35

Correlation Coefficient

Bayer AG  Rayonier Advanced

Very good diversification

The 3 months correlation between Bayer and Rayonier is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Bayer AG i.e., Bayer AG and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Bayer AG and Rayonier Advanced

Assuming the 90 days trading horizon Bayer AG NA is expected to under-perform the Rayonier Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Bayer AG NA is 1.56 times less risky than Rayonier Advanced. The stock trades about -0.24 of its potential returns per unit of risk. The Rayonier Advanced Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  665.00  in Rayonier Advanced Materials on September 23, 2024 and sell it today you would earn a total of  45.00  from holding Rayonier Advanced Materials or generate 6.77% return on investment over 90 days.

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

Bayer AG NA  vs.  Rayonier Advanced Materials

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rayonier Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bayer AG and Rayonier Advanced

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

The idea behind Bayer AG NA and Rayonier Advanced Materials 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.