Correlation Between Solvay SA and BASF SE
Can any of the company-specific risk be diversified away by investing in both Solvay SA 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 Solvay SA and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA ADR and BASF SE NA, you can compare the effects of market volatilities on Solvay SA 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 Solvay SA with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and BASF SE.
Diversification Opportunities for Solvay SA and BASF SE
Very weak diversification
The 3 months correlation between Solvay and BASF is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA ADR 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 Solvay SA 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 Solvay SA ADR 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 Solvay SA i.e., Solvay SA and BASF SE go up and down completely randomly.
Pair Corralation between Solvay SA and BASF SE
Assuming the 90 days horizon Solvay SA ADR is expected to under-perform the BASF SE. But the pink sheet apears to be less risky and, when comparing its historical volatility, Solvay SA ADR is 1.15 times less risky than BASF SE. The pink sheet trades about -0.46 of its potential returns per unit of risk. The BASF SE NA is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 4,980 in BASF SE NA on August 28, 2024 and sell it today you would lose (530.00) from holding BASF SE NA or give up 10.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Solvay SA ADR vs. BASF SE NA
Performance |
| Timeline |
| Solvay SA ADR |
| BASF SE NA |
Solvay SA and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay SA and BASF SE
The main advantage of trading using opposite Solvay SA and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA 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.| Solvay SA vs. Origin Materials | Solvay SA vs. BASF SE NA | Solvay SA vs. Braskem SA Class | Solvay SA vs. Lsb Industries |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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