Correlation Between Bayer AG and Takeda Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Bayer AG and Takeda Pharmaceutical 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 Takeda Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG and Takeda Pharmaceutical Co, you can compare the effects of market volatilities on Bayer AG and Takeda Pharmaceutical 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 Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Takeda Pharmaceutical.
Diversification Opportunities for Bayer AG and Takeda Pharmaceutical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bayer and Takeda is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG and Takeda Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Bayer AG i.e., Bayer AG and Takeda Pharmaceutical go up and down completely randomly.
Pair Corralation between Bayer AG and Takeda Pharmaceutical
Assuming the 90 days horizon Bayer AG is expected to generate 1.66 times more return on investment than Takeda Pharmaceutical. However, Bayer AG is 1.66 times more volatile than Takeda Pharmaceutical Co. It trades about 0.2 of its potential returns per unit of risk. Takeda Pharmaceutical Co is currently generating about 0.32 per unit of risk. If you would invest 2,333 in Bayer AG on December 24, 2024 and sell it today you would earn a total of 263.00 from holding Bayer AG or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bayer AG vs. Takeda Pharmaceutical Co
Performance |
| Timeline |
| Bayer AG |
| Takeda Pharmaceutical |
Bayer AG and Takeda Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and Takeda Pharmaceutical
The main advantage of trading using opposite Bayer AG and Takeda Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, Takeda Pharmaceutical 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 Takeda Pharmaceutical will offset losses from the drop in Takeda Pharmaceutical's long position.| Bayer AG vs. Universal Technical Institute | Bayer AG vs. John Wiley Sons | Bayer AG vs. Vera Bradley | Bayer AG vs. Scholastic |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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