Correlation Between Shin-Etsu Chemical and BASF SE
Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical 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 Shin-Etsu Chemical and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Etsu Chemical Co and BASF SE ADR, you can compare the effects of market volatilities on Shin-Etsu Chemical 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 Shin-Etsu Chemical with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and BASF SE.
Diversification Opportunities for Shin-Etsu Chemical and BASF SE
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shin-Etsu and BASF is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR and Shin-Etsu Chemical 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 Shin Etsu Chemical 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 ADR has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and BASF SE go up and down completely randomly.
Pair Corralation between Shin-Etsu Chemical and BASF SE
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the BASF SE. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 1.08 times less risky than BASF SE. The pink sheet trades about -0.16 of its potential returns per unit of risk. The BASF SE ADR is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,086 in BASF SE ADR on November 3, 2024 and sell it today you would earn a total of 116.00 from holding BASF SE ADR or generate 10.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Etsu Chemical Co vs. BASF SE ADR
Performance |
| Timeline |
| Shin Etsu Chemical |
| BASF SE ADR |
Shin-Etsu Chemical and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin-Etsu Chemical and BASF SE
The main advantage of trading using opposite Shin-Etsu Chemical and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical 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.| Shin-Etsu Chemical vs. BASF SE NA | Shin-Etsu Chemical vs. BASF SE ADR | Shin-Etsu Chemical vs. Braskem SA Class | Shin-Etsu Chemical vs. Celanese |
| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. First Graphene | BASF SE vs. Huntsman |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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