Correlation Between Bayer AG and S A P
Can any of the company-specific risk be diversified away by investing in both Bayer AG and S A P 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 S A P 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 SAP SE, you can compare the effects of market volatilities on Bayer AG and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and S A P.
Diversification Opportunities for Bayer AG and S A P
Poor diversification
The 3 months correlation between Bayer and SAP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG NA and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Bayer AG i.e., Bayer AG and S A P go up and down completely randomly.
Pair Corralation between Bayer AG and S A P
Assuming the 90 days trading horizon Bayer AG NA is expected to generate 1.78 times more return on investment than S A P. However, Bayer AG is 1.78 times more volatile than SAP SE. It trades about 0.16 of its potential returns per unit of risk. SAP SE is currently generating about 0.07 per unit of risk. If you would invest 2,009 in Bayer AG NA on December 11, 2024 and sell it today you would earn a total of 296.00 from holding Bayer AG NA or generate 14.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayer AG NA vs. SAP SE
Performance |
| Timeline |
| Bayer AG NA |
| SAP SE |
Bayer AG and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and S A P
The main advantage of trading using opposite Bayer AG and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.| Bayer AG vs. Extra Space Storage | Bayer AG vs. Air Lease | Bayer AG vs. Pembina Pipeline Corp | Bayer AG vs. DATALOGIC |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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