Correlation Between Interactive Brokers and Bayer AG

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

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

Diversification Opportunities for Interactive Brokers and Bayer AG

-0.21

Correlation Coefficient

Interactive Brokers  Bayer AG

Very good diversification

The 3 months correlation between Interactive and Bayer is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Interactive Brokers Group and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and Interactive Brokers 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 Interactive Brokers Group 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 Interactive Brokers i.e., Interactive Brokers and Bayer AG go up and down completely randomly.

Pair Corralation between Interactive Brokers and Bayer AG

Given the investment horizon of 90 days Interactive Brokers Group is expected to under-perform the Bayer AG. In addition to that, Interactive Brokers is 1.38 times more volatile than Bayer AG. It trades about -0.02 of its total potential returns per unit of risk. Bayer AG is currently generating about 0.16 per unit of volatility. If you would invest  1,975  in Bayer AG on December 30, 2024 and sell it today you would earn a total of  476.00  from holding Bayer AG or generate 24.1% return on investment over 90 days.

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

Interactive Brokers Group  vs.  Bayer AG

Interactive Brokers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interactive Brokers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Interactive Brokers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bayer AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bayer AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bayer AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Interactive Brokers and Bayer AG

The main advantage of trading using opposite Interactive Brokers and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interactive Brokers 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 Interactive Brokers Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.