Correlation Between BASF SE and Lsb Industries
Can any of the company-specific risk be diversified away by investing in both BASF SE and Lsb Industries 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 Lsb Industries 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 Lsb Industries, you can compare the effects of market volatilities on BASF SE and Lsb Industries 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 Lsb Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Lsb Industries.
Diversification Opportunities for BASF SE and Lsb Industries
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BASF and Lsb is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries 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 Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of BASF SE i.e., BASF SE and Lsb Industries go up and down completely randomly.
Pair Corralation between BASF SE and Lsb Industries
Assuming the 90 days horizon BASF SE is expected to generate 1.24 times less return on investment than Lsb Industries. But when comparing it to its historical volatility, BASF SE NA is 2.66 times less risky than Lsb Industries. It trades about 0.25 of its potential returns per unit of risk. Lsb Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 770.00 in Lsb Industries on November 2, 2024 and sell it today you would earn a total of 82.00 from holding Lsb Industries or generate 10.65% 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 NA vs. Lsb Industries
Performance |
| Timeline |
| BASF SE NA |
| Lsb Industries |
BASF SE and Lsb Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Lsb Industries
The main advantage of trading using opposite BASF SE and Lsb Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Lsb Industries 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 Lsb Industries will offset losses from the drop in Lsb Industries' 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 |
| Lsb Industries vs. Green Plains Renewable | Lsb Industries vs. AdvanSix | Lsb Industries vs. Tronox Holdings PLC | Lsb Industries vs. Methanex |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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