Correlation Between BASF SE and North American
Can any of the company-specific risk be diversified away by investing in both BASF SE and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE and North American Construction, you can compare the effects of market volatilities on BASF SE and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and North American.
Diversification Opportunities for BASF SE and North American
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BASF and North is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of BASF SE i.e., BASF SE and North American go up and down completely randomly.
Pair Corralation between BASF SE and North American
Assuming the 90 days trading horizon BASF SE is expected to under-perform the North American. But the stock apears to be less risky and, when comparing its historical volatility, BASF SE is 1.72 times less risky than North American. The stock trades about -0.17 of its potential returns per unit of risk. The North American Construction is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,570 in North American Construction on August 29, 2024 and sell it today you would earn a total of 300.00 from holding North American Construction or generate 19.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BASF SE vs. North American Construction
Performance |
| Timeline |
| BASF SE |
| North American Const |
BASF SE and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and North American
The main advantage of trading using opposite BASF SE and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| BASF SE vs. GAMING FAC SA | BASF SE vs. Boyd Gaming | BASF SE vs. Siamgas And Petrochemicals | BASF SE vs. Penn National Gaming |
| North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. SIVERS SEMICONDUCTORS AB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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