Correlation Between Roche Holding and Bayer AG
Can any of the company-specific risk be diversified away by investing in both Roche Holding 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 Roche Holding and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding Ltd and Bayer AG, you can compare the effects of market volatilities on Roche Holding 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 Roche Holding with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Bayer AG.
Diversification Opportunities for Roche Holding and Bayer AG
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Roche and Bayer is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding Ltd and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG and Roche Holding 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 Roche Holding Ltd 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 Roche Holding i.e., Roche Holding and Bayer AG go up and down completely randomly.
Pair Corralation between Roche Holding and Bayer AG
Assuming the 90 days horizon Roche Holding Ltd is expected to generate 0.91 times more return on investment than Bayer AG. However, Roche Holding Ltd is 1.1 times less risky than Bayer AG. It trades about 0.4 of its potential returns per unit of risk. Bayer AG is currently generating about 0.12 per unit of risk. If you would invest 3,635 in Roche Holding Ltd on November 18, 2024 and sell it today you would earn a total of 471.00 from holding Roche Holding Ltd or generate 12.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roche Holding Ltd vs. Bayer AG
Performance |
| Timeline |
| Roche Holding |
| Bayer AG |
Roche Holding and Bayer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roche Holding and Bayer AG
The main advantage of trading using opposite Roche Holding and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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.| Roche Holding vs. Sanofi ADR | Roche Holding vs. AstraZeneca PLC ADR | Roche Holding vs. GlaxoSmithKline PLC ADR | Roche Holding vs. Merck Company |
| Bayer AG vs. Aldel Financial II | Bayer AG vs. Integrated Media Technology | Bayer AG vs. flyExclusive, | Bayer AG vs. Flutter Entertainment plc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |