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
Excellent diversification
The 3 months correlation between Dow and BASF is -0.58. 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 0.44 times more return on investment than BASF SE. However, Dow Jones Industrial is 2.29 times less risky than BASF SE. It trades about 0.38 of its potential returns per unit of risk. BASF SE is currently generating about -0.11 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 311,605 from holding Dow Jones Industrial or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 70.0% |
| 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. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| BASF SE vs. OTP Bank Nyrt | BASF SE vs. Infineon Technologies AG | BASF SE vs. Delta Technologies Nyrt | BASF SE vs. Commerzbank AG |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |