Correlation Between BASF SE and Sociedad Química
Can any of the company-specific risk be diversified away by investing in both BASF SE and Sociedad Química 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 Sociedad Química into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE and Sociedad Qumica y, you can compare the effects of market volatilities on BASF SE and Sociedad Química 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 Sociedad Química. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Sociedad Química.
Diversification Opportunities for BASF SE and Sociedad Química
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between BASF and Sociedad is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Química. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of BASF SE i.e., BASF SE and Sociedad Química go up and down completely randomly.
Pair Corralation between BASF SE and Sociedad Química
Assuming the 90 days trading horizon BASF SE is expected to generate 0.5 times more return on investment than Sociedad Química. However, BASF SE is 2.0 times less risky than Sociedad Química. It trades about 0.0 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about -0.03 per unit of risk. If you would invest 4,577 in BASF SE on October 20, 2024 and sell it today you would lose (133.00) from holding BASF SE or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BASF SE vs. Sociedad Qumica y
Performance |
| Timeline |
| BASF SE |
| Sociedad Qumica y |
BASF SE and Sociedad Química Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Sociedad Química
The main advantage of trading using opposite BASF SE and Sociedad Química positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Sociedad Química 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 Sociedad Química will offset losses from the drop in Sociedad Química's long position.| BASF SE vs. Air Liquide SA | BASF SE vs. AIR LIQUIDE ADR | BASF SE vs. Air Products and | BASF SE vs. Shin Etsu Chemical Co |
| Sociedad Química vs. Air Liquide SA | Sociedad Química vs. AIR LIQUIDE ADR | Sociedad Química vs. Air Products and | Sociedad Química vs. Shin Etsu Chemical Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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