Correlation Between BASF SE and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both BASF SE and SIMS METAL 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 SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE and SIMS METAL MGT, you can compare the effects of market volatilities on BASF SE and SIMS METAL 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 SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and SIMS METAL.
Diversification Opportunities for BASF SE and SIMS METAL
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BASF and SIMS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of BASF SE i.e., BASF SE and SIMS METAL go up and down completely randomly.
Pair Corralation between BASF SE and SIMS METAL
Assuming the 90 days trading horizon BASF SE is expected to under-perform the SIMS METAL. But the stock apears to be less risky and, when comparing its historical volatility, BASF SE is 1.48 times less risky than SIMS METAL. The stock trades about -0.06 of its potential returns per unit of risk. The SIMS METAL MGT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 745.00 in SIMS METAL MGT on September 3, 2024 and sell it today you would earn a total of 65.00 from holding SIMS METAL MGT or generate 8.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BASF SE vs. SIMS METAL MGT
Performance |
| Timeline |
| BASF SE |
| SIMS METAL MGT |
BASF SE and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and SIMS METAL
The main advantage of trading using opposite BASF SE and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, SIMS METAL 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 SIMS METAL will offset losses from the drop in SIMS METAL's long position.| BASF SE vs. HF FOODS GRP | BASF SE vs. TYSON FOODS A | BASF SE vs. PT Indofood Sukses | BASF SE vs. Lifeway Foods |
| SIMS METAL vs. JAPAN AIRLINES | SIMS METAL vs. ARDAGH METAL PACDL 0001 | SIMS METAL vs. GREENX METALS LTD | SIMS METAL vs. Ming Le Sports |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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