Correlation Between S A P and Bayer Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both S A P and Bayer Aktiengesellscha 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 S A P and Bayer Aktiengesellscha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Bayer Aktiengesellschaft, you can compare the effects of market volatilities on S A P and Bayer Aktiengesellscha 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 S A P with a short position of Bayer Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Bayer Aktiengesellscha.
Diversification Opportunities for S A P and Bayer Aktiengesellscha
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SAP and Bayer is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Bayer Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer Aktiengesellschaft and S A P 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 SAP SE are associated (or correlated) with Bayer Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer Aktiengesellschaft has no effect on the direction of S A P i.e., S A P and Bayer Aktiengesellscha go up and down completely randomly.
Pair Corralation between S A P and Bayer Aktiengesellscha
Assuming the 90 days trading horizon SAP SE is expected to generate 0.35 times more return on investment than Bayer Aktiengesellscha. However, SAP SE is 2.84 times less risky than Bayer Aktiengesellscha. It trades about 0.13 of its potential returns per unit of risk. Bayer Aktiengesellschaft is currently generating about -0.02 per unit of risk. If you would invest 14,267 in SAP SE on August 25, 2024 and sell it today you would earn a total of 8,348 from holding SAP SE or generate 58.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Bayer Aktiengesellschaft
Performance |
| Timeline |
| SAP SE |
| Bayer Aktiengesellschaft |
S A P and Bayer Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Bayer Aktiengesellscha
The main advantage of trading using opposite S A P and Bayer Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Bayer Aktiengesellscha 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 Aktiengesellscha will offset losses from the drop in Bayer Aktiengesellscha's long position.The idea behind SAP SE and Bayer Aktiengesellschaft 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.| Bayer Aktiengesellscha vs. Johnson Johnson | Bayer Aktiengesellscha vs. Merck Co | Bayer Aktiengesellscha vs. Roche Holding Ltd | Bayer Aktiengesellscha vs. Amgen 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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