Correlation Between Neinor Homes and Bayer AG

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

Diversification Opportunities for Neinor Homes and Bayer AG

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Neinor and Bayer is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA and Neinor Homes 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 Neinor Homes SA 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 NA has no effect on the direction of Neinor Homes i.e., Neinor Homes and Bayer AG go up and down completely randomly.

Pair Corralation between Neinor Homes and Bayer AG

Assuming the 90 days trading horizon Neinor Homes SA is expected to generate 0.77 times more return on investment than Bayer AG. However, Neinor Homes SA is 1.3 times less risky than Bayer AG. It trades about 0.12 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.11 per unit of risk. If you would invest  865.00  in Neinor Homes SA on September 1, 2024 and sell it today you would earn a total of  639.00  from holding Neinor Homes SA or generate 73.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.64%
ValuesDaily Returns

Neinor Homes SA  vs.  Bayer AG NA

 Performance 
       Timeline  
Neinor Homes SA 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Neinor Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.
Bayer AG NA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Neinor Homes and Bayer AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Neinor Homes and Bayer AG

The main advantage of trading using opposite Neinor Homes and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neinor Homes 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 Neinor Homes SA and Bayer AG NA 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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