Correlation Between BASF SE and Air Products
Can any of the company-specific risk be diversified away by investing in both BASF SE and Air Products 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 BASF SE and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE and Air Products and, you can compare the effects of market volatilities on BASF SE and Air Products 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 BASF SE with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Air Products.
Diversification Opportunities for BASF SE and Air Products
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BASF and Air is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and BASF SE 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 BASF SE are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of BASF SE i.e., BASF SE and Air Products go up and down completely randomly.
Pair Corralation between BASF SE and Air Products
Assuming the 90 days horizon BASF SE is expected to generate 1.47 times less return on investment than Air Products. But when comparing it to its historical volatility, BASF SE is 1.18 times less risky than Air Products. It trades about 0.03 of its potential returns per unit of risk. Air Products and is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 24,873 in Air Products and on November 1, 2024 and sell it today you would earn a total of 6,647 from holding Air Products and or generate 26.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
BASF SE vs. Air Products and
Performance |
| Timeline |
| BASF SE |
| Air Products |
BASF SE and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Air Products
The main advantage of trading using opposite BASF SE and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| BASF SE vs. Allianz SE | BASF SE vs. Siemens Aktiengesellschaft | BASF SE vs. Bayer AG NA | BASF SE vs. SAP SE |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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