Correlation Between Bayer AG and Astellas Pharma
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Astellas Pharma 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 Astellas Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG and Astellas Pharma, you can compare the effects of market volatilities on Bayer AG and Astellas Pharma 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 Astellas Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Astellas Pharma.
Diversification Opportunities for Bayer AG and Astellas Pharma
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bayer and Astellas is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 are associated (or correlated) with Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Bayer AG i.e., Bayer AG and Astellas Pharma go up and down completely randomly.
Pair Corralation between Bayer AG and Astellas Pharma
Assuming the 90 days horizon Bayer AG is expected to under-perform the Astellas Pharma. In addition to that, Bayer AG is 1.39 times more volatile than Astellas Pharma. It trades about -0.08 of its total potential returns per unit of risk. Astellas Pharma is currently generating about -0.05 per unit of volatility. If you would invest 1,539 in Astellas Pharma on August 23, 2024 and sell it today you would lose (534.00) from holding Astellas Pharma or give up 34.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bayer AG vs. Astellas Pharma
Performance |
| Timeline |
| Bayer AG |
| Astellas Pharma |
Bayer AG and Astellas Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Astellas Pharma
The main advantage of trading using opposite Bayer AG and Astellas Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Astellas Pharma 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 Astellas Pharma will offset losses from the drop in Astellas Pharma's long position.| Bayer AG vs. Turning Point Brands | Bayer AG vs. Rumble Inc | Bayer AG vs. Asure Software | Bayer AG vs. Universal |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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