Correlation Between BASF SE and Origin Materials
Can any of the company-specific risk be diversified away by investing in both BASF SE and Origin Materials 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 Origin Materials 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 Origin Materials Warrant, you can compare the effects of market volatilities on BASF SE and Origin Materials 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 Origin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Origin Materials.
Diversification Opportunities for BASF SE and Origin Materials
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between BASF and Origin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA and Origin Materials Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials Warrant 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials Warrant has no effect on the direction of BASF SE i.e., BASF SE and Origin Materials go up and down completely randomly.
Pair Corralation between BASF SE and Origin Materials
Assuming the 90 days horizon BASF SE is expected to generate 5.92 times less return on investment than Origin Materials. But when comparing it to its historical volatility, BASF SE NA is 2.97 times less risky than Origin Materials. It trades about 0.02 of its potential returns per unit of risk. Origin Materials Warrant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 98.00 in Origin Materials Warrant on August 28, 2024 and sell it today you would lose (88.00) from holding Origin Materials Warrant or give up 89.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 89.71% |
| Values | Daily Returns |
BASF SE NA vs. Origin Materials Warrant
Performance |
| Timeline |
| BASF SE NA |
| Origin Materials Warrant |
BASF SE and Origin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Origin Materials
The main advantage of trading using opposite BASF SE and Origin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Origin Materials 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 Origin Materials will offset losses from the drop in Origin Materials' 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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