Correlation Between BASF SE and Kuraray
Can any of the company-specific risk be diversified away by investing in both BASF SE and Kuraray 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 Kuraray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE NA and Kuraray Co, you can compare the effects of market volatilities on BASF SE and Kuraray 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 Kuraray. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Kuraray.
Diversification Opportunities for BASF SE and Kuraray
Very poor diversification
The 3 months correlation between BASF and Kuraray is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA and Kuraray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuraray 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 NA are associated (or correlated) with Kuraray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuraray has no effect on the direction of BASF SE i.e., BASF SE and Kuraray go up and down completely randomly.
Pair Corralation between BASF SE and Kuraray
Assuming the 90 days horizon BASF SE NA is expected to under-perform the Kuraray. In addition to that, BASF SE is 1.03 times more volatile than Kuraray Co. It trades about -0.19 of its total potential returns per unit of risk. Kuraray Co is currently generating about -0.18 per unit of volatility. If you would invest 4,143 in Kuraray Co on August 31, 2024 and sell it today you would lose (468.00) from holding Kuraray Co or give up 11.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BASF SE NA vs. Kuraray Co
Performance |
| Timeline |
| BASF SE NA |
| Kuraray |
BASF SE and Kuraray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Kuraray
The main advantage of trading using opposite BASF SE and Kuraray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Kuraray 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 Kuraray will offset losses from the drop in Kuraray's long position.| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. BASF SE ADR | BASF SE vs. Braskem SA Class | BASF SE vs. Celanese |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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