Correlation Between Neinor Homes and Bayer AG
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.64% |
Values | Daily Returns |
Neinor Homes SA vs. Bayer AG NA
Performance |
Timeline |
Neinor Homes SA |
Bayer AG NA |
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.Neinor Homes vs. Science Applications International | Neinor Homes vs. National Storage Affiliates | Neinor Homes vs. Datang International Power | Neinor Homes vs. Strategic Education |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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