Correlation Between Vericel Corp and Bayer AG

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Can any of the company-specific risk be diversified away by investing in both Vericel Corp 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 Vericel Corp and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vericel Corp Ord and Bayer AG PK, you can compare the effects of market volatilities on Vericel Corp 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 Vericel Corp with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vericel Corp and Bayer AG.

Diversification Opportunities for Vericel Corp and Bayer AG

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vericel and Bayer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and Bayer AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG PK and Vericel Corp 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 Vericel Corp Ord 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 PK has no effect on the direction of Vericel Corp i.e., Vericel Corp and Bayer AG go up and down completely randomly.

Pair Corralation between Vericel Corp and Bayer AG

Given the investment horizon of 90 days Vericel Corp is expected to generate 10.39 times less return on investment than Bayer AG. But when comparing it to its historical volatility, Vericel Corp Ord is 1.02 times less risky than Bayer AG. It trades about 0.07 of its potential returns per unit of risk. Bayer AG PK is currently generating about 0.68 of returns per unit of risk over similar time horizon. If you would invest  1,566  in Bayer AG PK on August 27, 2024 and sell it today you would earn a total of  120.00  from holding Bayer AG PK or generate 7.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy0.88%
ValuesDaily Returns

Vericel Corp Ord  vs.  Bayer AG PK

 Performance 
       Timeline  
Vericel Corp Ord 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Bayer AG PK 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bayer AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bayer AG is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Vericel Corp and Bayer AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vericel Corp and Bayer AG

The main advantage of trading using opposite Vericel Corp and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp 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.
The idea behind Vericel Corp Ord and Bayer AG PK 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.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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