Correlation Between Bayer AG and Biogen
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Biogen 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 Bayer AG and Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG NA and Biogen Inc, you can compare the effects of market volatilities on Bayer AG and Biogen 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 Bayer AG with a short position of Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Biogen.
Diversification Opportunities for Bayer AG and Biogen
Poor diversification
The 3 months correlation between Bayer and Biogen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Bayer AG 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 Bayer AG NA are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Bayer AG i.e., Bayer AG and Biogen go up and down completely randomly.
Pair Corralation between Bayer AG and Biogen
Assuming the 90 days trading horizon Bayer AG NA is expected to under-perform the Biogen. In addition to that, Bayer AG is 2.07 times more volatile than Biogen Inc. It trades about -0.36 of its total potential returns per unit of risk. Biogen Inc is currently generating about -0.27 per unit of volatility. If you would invest 16,795 in Biogen Inc on August 29, 2024 and sell it today you would lose (1,675) from holding Biogen Inc or give up 9.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Bayer AG NA vs. Biogen Inc
Performance |
| Timeline |
| Bayer AG NA |
| Biogen Inc |
Bayer AG and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Biogen
The main advantage of trading using opposite Bayer AG and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.| Bayer AG vs. CENTURIA OFFICE REIT | Bayer AG vs. Neinor Homes SA | Bayer AG vs. COMMERCIAL VEHICLE | Bayer AG vs. Commercial Vehicle Group |
| Biogen vs. CEOTRONICS | Biogen vs. Coor Service Management | Biogen vs. AGF Management Limited | Biogen vs. Jupiter Fund Management |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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