Correlation Between Astellas Pharma and Bayer Aktiengesellscha

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

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

Diversification Opportunities for Astellas Pharma and Bayer Aktiengesellscha

-0.35

Correlation Coefficient

Astellas Pharma  Bayer Aktiengesellscha

Very good diversification

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

Pair Corralation between Astellas Pharma and Bayer Aktiengesellscha

Assuming the 90 days horizon Astellas Pharma is expected to under-perform the Bayer Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, Astellas Pharma is 2.35 times less risky than Bayer Aktiengesellscha. The stock trades about -0.06 of its potential returns per unit of risk. The Bayer Aktiengesellschaft is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Bayer Aktiengesellschaft on December 2, 2024 and sell it today you would earn a total of  50.00  from holding Bayer Aktiengesellschaft or generate 10.0% return on investment over 90 days.

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

Astellas Pharma  vs.  Bayer Aktiengesellschaft

Astellas Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astellas Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bayer Aktiengesellschaft

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bayer Aktiengesellschaft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bayer Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astellas Pharma and Bayer Aktiengesellscha

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

The idea behind Astellas Pharma and Bayer Aktiengesellschaft 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.