Correlation Between BASF SE and Shin Etsu
Can any of the company-specific risk be diversified away by investing in both BASF SE and Shin Etsu 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 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 Shin Etsu Chemical Co, you can compare the effects of market volatilities on BASF SE and Shin Etsu 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Shin Etsu.
Diversification Opportunities for BASF SE and Shin Etsu
Poor diversification
The 3 months correlation between BASF and Shin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA 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 NA are associated (or correlated) with Shin Etsu. 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 go up and down completely randomly.
Pair Corralation between BASF SE and Shin Etsu
Assuming the 90 days horizon BASF SE is expected to generate 1.04 times less return on investment than Shin Etsu. In addition to that, BASF SE is 1.05 times more volatile than Shin Etsu Chemical Co. It trades about 0.01 of its total potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about 0.02 per unit of volatility. If you would invest 1,760 in Shin Etsu Chemical Co on August 24, 2024 and sell it today you would earn a total of 55.00 from holding Shin Etsu Chemical Co or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.6% |
| Values | Daily Returns |
BASF SE NA vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| BASF SE NA |
| Shin Etsu Chemical |
BASF SE and Shin Etsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and Shin Etsu
The main advantage of trading using opposite BASF SE and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Shin Etsu 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 will offset losses from the drop in Shin Etsu'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 |
| Shin Etsu vs. BASF SE NA | Shin Etsu vs. BASF SE ADR | Shin Etsu vs. Braskem SA Class | Shin Etsu 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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