Correlation Between North American and BASF SE
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and BASF SE, you can compare the effects of market volatilities on North American 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 North American with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and BASF SE.
Diversification Opportunities for North American and BASF SE
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and BASF is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and North American 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 North American Construction 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 North American i.e., North American and BASF SE go up and down completely randomly.
Pair Corralation between North American and BASF SE
Assuming the 90 days horizon North American Construction is expected to generate 1.53 times more return on investment than BASF SE. However, North American is 1.53 times more volatile than BASF SE. It trades about 0.08 of its potential returns per unit of risk. BASF SE is currently generating about -0.06 per unit of risk. If you would invest 1,650 in North American Construction on August 29, 2024 and sell it today you would earn a total of 220.00 from holding North American Construction or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
North American Construction vs. BASF SE
Performance |
| Timeline |
| North American Const |
| BASF SE |
North American and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and BASF SE
The main advantage of trading using opposite North American and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. SIVERS SEMICONDUCTORS AB |
| BASF SE vs. GAMING FAC SA | BASF SE vs. Boyd Gaming | BASF SE vs. Siamgas And Petrochemicals | BASF SE vs. Penn National Gaming |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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