Correlation Between Industrial and Bayer AG

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Industrial 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 Industrial and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial and Commercial and Bayer AG NA, you can compare the effects of market volatilities on Industrial 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 Industrial with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Bayer AG.

Diversification Opportunities for Industrial and Bayer AG

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Industrial and Bayer is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA and Industrial 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 Industrial and Commercial 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 NA has no effect on the direction of Industrial i.e., Industrial and Bayer AG go up and down completely randomly.

Pair Corralation between Industrial and Bayer AG

Assuming the 90 days horizon Industrial and Commercial is expected to generate 1.13 times more return on investment than Bayer AG. However, Industrial is 1.13 times more volatile than Bayer AG NA. It trades about 0.1 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.2 per unit of risk. If you would invest  49.00  in Industrial and Commercial on September 17, 2024 and sell it today you would earn a total of  9.00  from holding Industrial and Commercial or generate 18.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Industrial and Commercial  vs.  Bayer AG NA

 Performance 
       Timeline  
Industrial and Commercial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.
Bayer AG NA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Industrial and Bayer AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Industrial and Bayer AG

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

Other Complementary Tools

Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Commodity Directory
Find actively traded commodities issued by global exchanges
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device