Correlation Between American Express and BASF SE
Can any of the company-specific risk be diversified away by investing in both American Express and BASF SE 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 American Express and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and BASF SE NA, you can compare the effects of market volatilities on American Express and BASF SE 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 American Express with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and BASF SE.
Diversification Opportunities for American Express and BASF SE
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and BASF is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Express and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA and American Express 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 American Express are associated (or correlated) with BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE NA has no effect on the direction of American Express i.e., American Express and BASF SE go up and down completely randomly.
Pair Corralation between American Express and BASF SE
Considering the 90-day investment horizon American Express is expected to generate 0.63 times more return on investment than BASF SE. However, American Express is 1.59 times less risky than BASF SE. It trades about 0.12 of its potential returns per unit of risk. BASF SE NA is currently generating about 0.0 per unit of risk. If you would invest 16,785 in American Express on August 31, 2024 and sell it today you would earn a total of 13,683 from holding American Express or generate 81.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 86.9% |
| Values | Daily Returns |
American Express vs. BASF SE NA
Performance |
| Timeline |
| American Express |
| BASF SE NA |
American Express and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and BASF SE
The main advantage of trading using opposite American Express and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| American Express vs. Visa Class A | American Express vs. RLJ Lodging Trust | American Express vs. Aquagold International | American Express vs. Stepstone Group |
| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. BASF SE ADR | BASF SE vs. Braskem SA Class | BASF SE vs. Celanese |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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