Correlation Between BASF SE and Shin-Etsu Chemical
Can any of the company-specific risk be diversified away by investing in both BASF SE and Shin-Etsu 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 Shin-Etsu 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 Shin Etsu Chemical Co, you can compare the effects of market volatilities on BASF SE and Shin-Etsu 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 Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Shin-Etsu Chemical.
Diversification Opportunities for BASF SE and Shin-Etsu Chemical
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BASF and Shin-Etsu is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE ADR and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu 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 Shin-Etsu Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of BASF SE i.e., BASF SE and Shin-Etsu Chemical go up and down completely randomly.
Pair Corralation between BASF SE and Shin-Etsu Chemical
Assuming the 90 days horizon BASF SE ADR is expected to under-perform the Shin-Etsu Chemical. But the otc stock apears to be less risky and, when comparing its historical volatility, BASF SE ADR is 1.15 times less risky than Shin-Etsu Chemical. The otc stock trades about -0.06 of its potential returns per unit of risk. The Shin Etsu Chemical Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,906 in Shin Etsu Chemical Co on September 1, 2024 and sell it today you would lose (52.00) from holding Shin Etsu Chemical Co or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BASF SE ADR vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| BASF SE ADR |
| Shin Etsu Chemical |
BASF SE and Shin-Etsu Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Shin-Etsu Chemical
The main advantage of trading using opposite BASF SE and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Shin-Etsu 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 Shin-Etsu Chemical will offset losses from the drop in Shin-Etsu 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 |
| Shin-Etsu Chemical vs. BASF SE NA | Shin-Etsu Chemical vs. Braskem SA Class | Shin-Etsu Chemical vs. Lsb Industries | Shin-Etsu Chemical vs. Dow Inc |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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