Correlation Between BASF SE and Mitsubishi Chemical
Can any of the company-specific risk be diversified away by investing in both BASF SE and Mitsubishi Chemical 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 Mitsubishi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE ADR and Mitsubishi Chemical Holdings, you can compare the effects of market volatilities on BASF SE and Mitsubishi Chemical 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 Mitsubishi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Mitsubishi Chemical.
Diversification Opportunities for BASF SE and Mitsubishi Chemical
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BASF and Mitsubishi is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE ADR and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical 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 ADR are associated (or correlated) with Mitsubishi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Chemical has no effect on the direction of BASF SE i.e., BASF SE and Mitsubishi Chemical go up and down completely randomly.
Pair Corralation between BASF SE and Mitsubishi Chemical
Assuming the 90 days horizon BASF SE ADR is expected to generate 1.4 times more return on investment than Mitsubishi Chemical. However, BASF SE is 1.4 times more volatile than Mitsubishi Chemical Holdings. It trades about 0.27 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about 0.08 per unit of risk. If you would invest 1,086 in BASF SE ADR on November 3, 2024 and sell it today you would earn a total of 116.00 from holding BASF SE ADR or generate 10.68% 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 ADR vs. Mitsubishi Chemical Holdings
Performance |
| Timeline |
| BASF SE ADR |
| Mitsubishi Chemical |
BASF SE and Mitsubishi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Mitsubishi Chemical
The main advantage of trading using opposite BASF SE and Mitsubishi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Mitsubishi Chemical 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 Mitsubishi Chemical will offset losses from the drop in Mitsubishi Chemical's long position.| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. First Graphene | BASF SE vs. Huntsman |
| Mitsubishi Chemical vs. Sumitomo Chemical Co | Mitsubishi Chemical vs. Asahi Kaisei Corp | Mitsubishi Chemical vs. Nitto Denko Corp | Mitsubishi Chemical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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