Correlation Between Bayer AG and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson, you can compare the effects of market volatilities on Bayer AG and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Johnson Johnson.
Diversification Opportunities for Bayer AG and Johnson Johnson
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bayer and Johnson is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Bayer AG i.e., Bayer AG and Johnson Johnson go up and down completely randomly.
Pair Corralation between Bayer AG and Johnson Johnson
Assuming the 90 days trading horizon Bayer AG NA is expected to under-perform the Johnson Johnson. In addition to that, Bayer AG is 2.13 times more volatile than Johnson Johnson. It trades about -0.07 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.04 per unit of volatility. If you would invest 13,454 in Johnson Johnson on August 25, 2024 and sell it today you would earn a total of 1,416 from holding Johnson Johnson or generate 10.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayer AG NA vs. Johnson Johnson
Performance |
| Timeline |
| Bayer AG NA |
| Johnson Johnson |
Bayer AG and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Johnson Johnson
The main advantage of trading using opposite Bayer AG and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Bayer AG vs. Western Copper and | Bayer AG vs. LION ONE METALS | Bayer AG vs. ADRIATIC METALS LS 013355 | Bayer AG vs. Zijin Mining Group |
| Johnson Johnson vs. Merck Co | Johnson Johnson vs. Roche Holding Ltd | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Bayer AG NA |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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