Correlation Between Amgen and Bayer Aktiengesellscha

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

By analyzing existing cross correlation between Amgen Inc and Bayer Aktiengesellschaft, you can compare the effects of market volatilities on Amgen 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 Amgen with a short position of Bayer Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Bayer Aktiengesellscha.

Diversification Opportunities for Amgen and Bayer Aktiengesellscha

0.55

Correlation Coefficient

Amgen  Bayer Aktiengesellscha

Very weak diversification

The 3 months correlation between Amgen and Bayer is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Bayer Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer Aktiengesellschaft and Amgen 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 Amgen Inc 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 Amgen i.e., Amgen and Bayer Aktiengesellscha go up and down completely randomly.

Pair Corralation between Amgen and Bayer Aktiengesellscha

Assuming the 90 days horizon Amgen Inc is expected to generate 0.4 times more return on investment than Bayer Aktiengesellscha. However, Amgen Inc is 2.51 times less risky than Bayer Aktiengesellscha. It trades about 0.1 of its potential returns per unit of risk. Bayer Aktiengesellschaft is currently generating about 0.04 per unit of risk. If you would invest  25,205  in Amgen Inc on March 12, 2024 and sell it today you would earn a total of  2,900  from holding Amgen Inc or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Amgen Inc  vs.  Bayer Aktiengesellschaft

Amgen Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Amgen may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Bayer Aktiengesellschaft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayer Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Bayer Aktiengesellscha may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Amgen and Bayer Aktiengesellscha

The main advantage of trading using opposite Amgen and Bayer Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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 Amgen Inc 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.