Correlation Between Horizon Pharma and Bayer AG

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Can any of the company-specific risk be diversified away by investing in both Horizon Pharma and Bayer AG 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 Horizon Pharma and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Pharma PLC and Bayer AG, you can compare the effects of market volatilities on Horizon Pharma and Bayer AG 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 Horizon Pharma with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Pharma and Bayer AG.

Diversification Opportunities for Horizon Pharma and Bayer AG

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Horizon and Bayer is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Pharma PLC and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and Horizon Pharma 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 Horizon Pharma PLC are associated (or correlated) with Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG has no effect on the direction of Horizon Pharma i.e., Horizon Pharma and Bayer AG go up and down completely randomly.

Pair Corralation between Horizon Pharma and Bayer AG

If you would invest  10,040  in Horizon Pharma PLC on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Horizon Pharma PLC or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy1.54%
ValuesDaily Returns

Horizon Pharma PLC  vs.  Bayer AG

 Performance 
       Timeline  
Horizon Pharma PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Horizon Pharma PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Horizon Pharma is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Bayer AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bayer AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Horizon Pharma and Bayer AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Horizon Pharma and Bayer AG

The main advantage of trading using opposite Horizon Pharma and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Pharma position performs unexpectedly, Bayer AG 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 AG will offset losses from the drop in Bayer AG's long position.
The idea behind Horizon Pharma PLC and Bayer AG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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