Correlation Between Bayer AG and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Roche Holding 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 Roche Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG and Roche Holding AG, you can compare the effects of market volatilities on Bayer AG and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Roche Holding.
Diversification Opportunities for Bayer AG and Roche Holding
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bayer and Roche is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Bayer AG i.e., Bayer AG and Roche Holding go up and down completely randomly.
Pair Corralation between Bayer AG and Roche Holding
Assuming the 90 days horizon Bayer AG is expected to under-perform the Roche Holding. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bayer AG is 1.47 times less risky than Roche Holding. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Roche Holding AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 37,235 in Roche Holding AG on August 27, 2024 and sell it today you would lose (8,412) from holding Roche Holding AG or give up 22.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.13% |
| Values | Daily Returns |
Bayer AG vs. Roche Holding AG
Performance |
| Timeline |
| Bayer AG |
| Roche Holding AG |
Bayer AG and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Roche Holding
The main advantage of trading using opposite Bayer AG and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding's long position.The idea behind Bayer AG and Roche Holding AG 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.| Roche Holding vs. Novartis AG | Roche Holding vs. AstraZeneca PLC | Roche Holding vs. Roche Holding Ltd | Roche Holding vs. Sanofi ADR |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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