Correlation Between Otsuka Holdings and Bayer AG
Can any of the company-specific risk be diversified away by investing in both Otsuka Holdings and Bayer AG 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 Otsuka Holdings and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Otsuka Holdings Co and Bayer AG, you can compare the effects of market volatilities on Otsuka Holdings and Bayer AG 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 Otsuka Holdings with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otsuka Holdings and Bayer AG.
Diversification Opportunities for Otsuka Holdings and Bayer AG
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Otsuka and Bayer is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Otsuka Holdings Co and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and Otsuka Holdings 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 Otsuka Holdings Co are associated (or correlated) with Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG has no effect on the direction of Otsuka Holdings i.e., Otsuka Holdings and Bayer AG go up and down completely randomly.
Pair Corralation between Otsuka Holdings and Bayer AG
Assuming the 90 days horizon Otsuka Holdings Co is expected to generate 0.62 times more return on investment than Bayer AG. However, Otsuka Holdings Co is 1.61 times less risky than Bayer AG. It trades about 0.02 of its potential returns per unit of risk. Bayer AG is currently generating about -0.07 per unit of risk. If you would invest 3,839 in Otsuka Holdings Co on August 27, 2024 and sell it today you would earn a total of 109.00 from holding Otsuka Holdings Co or generate 2.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 52.02% |
| Values | Daily Returns |
Otsuka Holdings Co vs. Bayer AG
Performance |
| Timeline |
| Otsuka Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Bayer AG |
Otsuka Holdings and Bayer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Otsuka Holdings and Bayer AG
The main advantage of trading using opposite Otsuka Holdings and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otsuka Holdings position performs unexpectedly, Bayer AG 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 Bayer AG will offset losses from the drop in Bayer AG's long position.| Otsuka Holdings vs. Astellas Pharma | Otsuka Holdings vs. Sanofi ADR | Otsuka Holdings vs. Novartis AG ADR | Otsuka Holdings vs. Biogen Inc |
| Bayer AG vs. Sanofi ADR | Bayer AG vs. Bristol Myers Squibb | Bayer AG vs. AstraZeneca PLC ADR | Bayer AG vs. Gilead Sciences |
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 Stocks Directory module to find actively traded stocks across global markets.
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