Correlation Between RETAIL FOOD and Bayer AG

Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD 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 RETAIL FOOD and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RETAIL FOOD GROUP and Bayer AG NA, you can compare the effects of market volatilities on RETAIL FOOD 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 RETAIL FOOD with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and Bayer AG.

Diversification Opportunities for RETAIL FOOD and Bayer AG

-0.78

Correlation Coefficient

RETAIL FOOD  Bayer AG

Pay attention - limited upside

The 3 months correlation between RETAIL and Bayer is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP 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 RETAIL FOOD 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 RETAIL FOOD GROUP 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 RETAIL FOOD i.e., RETAIL FOOD and Bayer AG go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Bayer AG

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 0.73 times more return on investment than Bayer AG. However, RETAIL FOOD GROUP is 1.38 times less risky than Bayer AG. It trades about 0.07 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.24 per unit of risk. If you would invest  3.85  in RETAIL FOOD GROUP on September 5, 2024 and sell it today you would earn a total of  0.30  from holding RETAIL FOOD GROUP or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

RETAIL FOOD GROUP  vs.  Bayer AG NA

RETAIL FOOD GROUP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, RETAIL FOOD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bayer AG NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with RETAIL FOOD and Bayer AG

The main advantage of trading using opposite RETAIL FOOD and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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 RETAIL FOOD GROUP 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.