Correlation Between Bayer AG and Johnson Johnson

Can any of the company-specific risk be diversified away by investing in both Bayer AG 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 AG 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 AG PK and Johnson Johnson, you can compare the effects of market volatilities on Bayer AG 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 AG with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and Johnson Johnson.

Diversification Opportunities for Bayer AG and Johnson Johnson

-0.64

Correlation Coefficient

Bayer AG  Johnson Johnson

Excellent diversification

The 3 months correlation between Bayer and Johnson is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG PK and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Bayer AG 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 AG PK 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 AG i.e., Bayer AG and Johnson Johnson go up and down completely randomly.

Pair Corralation between Bayer AG and Johnson Johnson

If you would invest  1,686  in Bayer AG PK on February 5, 2024 and sell it today you would earn a total of  0.00  from holding Bayer AG PK or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Bayer AG PK  vs.  Johnson Johnson

Bayer AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bayer AG is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Bayer AG and Johnson Johnson

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

The idea behind Bayer AG PK and Johnson Johnson 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.