Correlation Between Bayer AG and Deutsche Lufthansa
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Deutsche Lufthansa 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 Deutsche Lufthansa 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 Deutsche Lufthansa AG, you can compare the effects of market volatilities on Bayer AG and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Deutsche Lufthansa.
Diversification Opportunities for Bayer AG and Deutsche Lufthansa
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bayer and Deutsche is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of Bayer AG i.e., Bayer AG and Deutsche Lufthansa go up and down completely randomly.
Pair Corralation between Bayer AG and Deutsche Lufthansa
Assuming the 90 days trading horizon Bayer AG NA is expected to under-perform the Deutsche Lufthansa. In addition to that, Bayer AG is 1.95 times more volatile than Deutsche Lufthansa AG. It trades about -0.34 of its total potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about -0.2 per unit of volatility. If you would invest 671.00 in Deutsche Lufthansa AG on August 25, 2024 and sell it today you would lose (52.00) from holding Deutsche Lufthansa AG or give up 7.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bayer AG NA vs. Deutsche Lufthansa AG
Performance |
| Timeline |
| Bayer AG NA |
| Deutsche Lufthansa |
Bayer AG and Deutsche Lufthansa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Deutsche Lufthansa
The main advantage of trading using opposite Bayer AG and Deutsche Lufthansa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Deutsche Lufthansa 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 Deutsche Lufthansa will offset losses from the drop in Deutsche Lufthansa'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 |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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