Correlation Between Dow Jones and BASF SE
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BASF SE 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 Dow Jones and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and BASF SE, you can compare the effects of market volatilities on Dow Jones and BASF SE 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 Dow Jones with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BASF SE.
Diversification Opportunities for Dow Jones and BASF SE
Very good diversification
The 3 months correlation between Dow and BASF is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Dow Jones i.e., Dow Jones and BASF SE go up and down completely randomly.
Pair Corralation between Dow Jones and BASF SE
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.52 times more return on investment than BASF SE. However, Dow Jones Industrial is 1.92 times less risky than BASF SE. It trades about 0.1 of its potential returns per unit of risk. BASF SE is currently generating about 0.02 per unit of risk. If you would invest 3,851,984 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 634,047 from holding Dow Jones Industrial or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.58% |
| Values | Daily Returns |
Dow Jones Industrial vs. BASF SE
Performance |
| Timeline |
Dow Jones and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BASF SE
Pair trading matchups for BASF SE
Pair Trading with Dow Jones and BASF SE
The main advantage of trading using opposite Dow Jones and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| BASF SE vs. Allianz SE | BASF SE vs. Siemens Aktiengesellschaft | BASF SE vs. Bayer AG NA | BASF SE vs. SAP SE |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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