Correlation Between Vestis and Bayer AG

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

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

Diversification Opportunities for Vestis and Bayer AG

-0.64

Correlation Coefficient

Vestis  Bayer AG

Excellent diversification

The 3 months correlation between Vestis and Bayer is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vestis and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and Vestis 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 Vestis 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 Vestis i.e., Vestis and Bayer AG go up and down completely randomly.

Pair Corralation between Vestis and Bayer AG

Given the investment horizon of 90 days Vestis is expected to generate 3.99 times less return on investment than Bayer AG. But when comparing it to its historical volatility, Vestis is 1.1 times less risky than Bayer AG. It trades about 0.08 of its potential returns per unit of risk. Bayer AG is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,973  in Bayer AG on October 23, 2024 and sell it today you would earn a total of  206.00  from holding Bayer AG or generate 10.44% return on investment over 90 days.

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

Vestis  vs.  Bayer AG

Vestis

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vestis are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Vestis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bayer AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting 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 Vestis and Bayer AG

The main advantage of trading using opposite Vestis and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestis 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 Vestis 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.