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
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bayer and Roche is 0.66. 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. In addition to that, Bayer AG is 2.68 times more volatile than Roche Holding AG. It trades about -0.33 of its total potential returns per unit of risk. Roche Holding AG is currently generating about -0.37 per unit of volatility. If you would invest 31,374 in Roche Holding AG on August 23, 2024 and sell it today you would lose (3,271) from holding Roche Holding AG or give up 10.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| 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.| Bayer AG vs. Turning Point Brands | Bayer AG vs. Rumble Inc | Bayer AG vs. Asure Software | Bayer AG vs. Universal |
| Roche Holding vs. Ono Pharmaceutical Co | Roche Holding vs. GSK plc | Roche Holding vs. Grifols SA ADR | Roche Holding vs. Pfizer Inc |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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