Correlation Between Bayer AG and AstraZeneca PLC

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Can any of the company-specific risk be diversified away by investing in both Bayer AG and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG PK and AstraZeneca PLC, you can compare the effects of market volatilities on Bayer AG and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and AstraZeneca PLC.

Diversification Opportunities for Bayer AG and AstraZeneca PLC

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bayer and AstraZeneca is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG PK and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 PK are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Bayer AG i.e., Bayer AG and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Bayer AG and AstraZeneca PLC

If you would invest  1,686  in Bayer AG PK on August 27, 2024 and sell it today you would earn a total of  0.00  from holding Bayer AG PK or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

Bayer AG PK  vs.  AstraZeneca PLC

 Performance 
       Timeline  
Bayer AG PK 

Risk-Adjusted Performance

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Over the last 90 days Bayer AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bayer AG is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
AstraZeneca PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bayer AG and AstraZeneca PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bayer AG and AstraZeneca PLC

The main advantage of trading using opposite Bayer AG and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.
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The idea behind Bayer AG PK and AstraZeneca PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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