Correlation Between Kuraray and BASF SE
Can any of the company-specific risk be diversified away by investing in both Kuraray 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 Kuraray and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kuraray Co and BASF SE NA, you can compare the effects of market volatilities on Kuraray 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 Kuraray with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuraray and BASF SE.
Diversification Opportunities for Kuraray and BASF SE
Significant diversification
The 3 months correlation between Kuraray and BASF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kuraray Co and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA and Kuraray 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 Kuraray Co 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 NA has no effect on the direction of Kuraray i.e., Kuraray and BASF SE go up and down completely randomly.
Pair Corralation between Kuraray and BASF SE
Assuming the 90 days horizon Kuraray Co is expected to under-perform the BASF SE. In addition to that, Kuraray is 1.61 times more volatile than BASF SE NA. It trades about -0.01 of its total potential returns per unit of risk. BASF SE NA is currently generating about 0.24 per unit of volatility. If you would invest 4,440 in BASF SE NA on November 3, 2024 and sell it today you would earn a total of 455.00 from holding BASF SE NA or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kuraray Co vs. BASF SE NA
Performance |
| Timeline |
| Kuraray |
| BASF SE NA |
Kuraray and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kuraray and BASF SE
The main advantage of trading using opposite Kuraray and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuraray 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.The idea behind Kuraray Co and BASF SE NA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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