Correlation Between Bayer Aktiengesellscha and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Bayer Aktiengesellscha and Johnson Johnson 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 Bayer Aktiengesellscha and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer Aktiengesellschaft and Johnson Johnson, you can compare the effects of market volatilities on Bayer Aktiengesellscha and Johnson Johnson 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 Bayer Aktiengesellscha with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer Aktiengesellscha and Johnson Johnson.
Diversification Opportunities for Bayer Aktiengesellscha and Johnson Johnson
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bayer and Johnson is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bayer Aktiengesellschaft and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Bayer Aktiengesellscha 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 Bayer Aktiengesellschaft are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Bayer Aktiengesellscha i.e., Bayer Aktiengesellscha and Johnson Johnson go up and down completely randomly.
Pair Corralation between Bayer Aktiengesellscha and Johnson Johnson
Assuming the 90 days horizon Bayer Aktiengesellschaft is expected to generate 2.52 times more return on investment than Johnson Johnson. However, Bayer Aktiengesellscha is 2.52 times more volatile than Johnson Johnson. It trades about 0.01 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.19 per unit of risk. If you would invest 2,919 in Bayer Aktiengesellschaft on January 24, 2024 and sell it today you would lose (11.00) from holding Bayer Aktiengesellschaft or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Bayer Aktiengesellschaft vs. Johnson Johnson
Performance |
| Timeline |
| Bayer Aktiengesellschaft |
| Johnson Johnson |
Bayer Aktiengesellscha and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer Aktiengesellscha and Johnson Johnson
The main advantage of trading using opposite Bayer Aktiengesellscha and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer Aktiengesellscha position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Bayer Aktiengesellscha vs. Eli Lilly and | Bayer Aktiengesellscha vs. Johnson Johnson | Bayer Aktiengesellscha vs. Merck Company | Bayer Aktiengesellscha vs. Roche Holding Ltd |
| Johnson Johnson vs. Silver Spike Investment | Johnson Johnson vs. Alkermes Plc | Johnson Johnson vs. Eagle Pharmaceuticals | Johnson Johnson vs. Evotec SE ADR |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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