Correlation Between Bayer AG and Gilead Sciences
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences, you can compare the effects of market volatilities on Bayer AG and Gilead Sciences 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 Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Gilead Sciences.
Diversification Opportunities for Bayer AG and Gilead Sciences
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bayer and Gilead is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG PK and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences 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 Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of Bayer AG i.e., Bayer AG and Gilead Sciences go up and down completely randomly.
Pair Corralation between Bayer AG and Gilead Sciences
If you would invest 8,900 in Gilead Sciences on August 26, 2024 and sell it today you would earn a total of 119.00 from holding Gilead Sciences or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Bayer AG PK vs. Gilead Sciences
Performance |
| Timeline |
| Bayer AG PK |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Gilead Sciences |
Bayer AG and Gilead Sciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Gilead Sciences
The main advantage of trading using opposite Bayer AG and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Gilead Sciences 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 Gilead Sciences will offset losses from the drop in Gilead Sciences' long position.| Bayer AG vs. Novartis AG ADR | Bayer AG vs. Sanofi ADR | Bayer AG vs. AstraZeneca PLC ADR | Bayer AG vs. GlaxoSmithKline PLC ADR |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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