Correlation Between Bayer Aktiengesellscha and Amgen

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

Diversification Opportunities for Bayer Aktiengesellscha and Amgen

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bayer and Amgen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bayer Aktiengesellschaft and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Bayer Aktiengesellscha i.e., Bayer Aktiengesellscha and Amgen go up and down completely randomly.

Pair Corralation between Bayer Aktiengesellscha and Amgen

Assuming the 90 days trading horizon Bayer Aktiengesellscha is expected to generate 1.15 times less return on investment than Amgen. In addition to that, Bayer Aktiengesellscha is 2.51 times more volatile than Amgen Inc. It trades about 0.04 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.1 per unit of volatility. 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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bayer Aktiengesellschaft  vs.  Amgen Inc

 Performance 
       Timeline  
Bayer Aktiengesellschaft 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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 fragile basic indicators, Bayer Aktiengesellscha may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Amgen Inc 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
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 Aktiengesellscha and Amgen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bayer Aktiengesellscha and Amgen

The main advantage of trading using opposite Bayer Aktiengesellscha and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer Aktiengesellscha position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.
The idea behind Bayer Aktiengesellschaft and Amgen Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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