Correlation Between AstraZeneca PLC and Bayer AG
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC 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 AstraZeneca PLC and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and Bayer AG, you can compare the effects of market volatilities on AstraZeneca PLC 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 AstraZeneca PLC with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Bayer AG.
Diversification Opportunities for AstraZeneca PLC and Bayer AG
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AstraZeneca and Bayer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC i.e., AstraZeneca PLC and Bayer AG go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Bayer AG
Assuming the 90 days horizon AstraZeneca PLC is expected to generate 0.65 times more return on investment than Bayer AG. However, AstraZeneca PLC is 1.53 times less risky than Bayer AG. It trades about -0.42 of its potential returns per unit of risk. Bayer AG is currently generating about -0.33 per unit of risk. If you would invest 15,640 in AstraZeneca PLC on August 23, 2024 and sell it today you would lose (3,090) from holding AstraZeneca PLC or give up 19.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC vs. Bayer AG
Performance |
| Timeline |
| AstraZeneca PLC |
| Bayer AG |
AstraZeneca PLC and Bayer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Bayer AG
The main advantage of trading using opposite AstraZeneca PLC and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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.| AstraZeneca PLC vs. Ono Pharmaceutical Co | AstraZeneca PLC vs. GSK plc | AstraZeneca PLC vs. Grifols SA ADR | AstraZeneca PLC vs. Pfizer Inc |
| Bayer AG vs. Turning Point Brands | Bayer AG vs. Rumble Inc | Bayer AG vs. Asure Software | Bayer AG vs. Universal |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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