Correlation Between Sumitomo Chemical and BASF SE
Can any of the company-specific risk be diversified away by investing in both Sumitomo 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 Sumitomo 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 Sumitomo Chemical Co and BASF SE NA, you can compare the effects of market volatilities on Sumitomo 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 Sumitomo Chemical with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and BASF SE.
Diversification Opportunities for Sumitomo Chemical and BASF SE
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and BASF is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical 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 Sumitomo 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 Sumitomo 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 NA has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and BASF SE go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and BASF SE
Assuming the 90 days horizon Sumitomo 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, Sumitomo Chemical Co is 1.09 times less risky than BASF SE. The pink sheet trades about -0.03 of its potential returns per unit of risk. The BASF SE NA is currently generating about 0.24 of returns per unit of risk over similar time horizon. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. BASF SE NA
Performance |
| Timeline |
| Sumitomo Chemical |
| BASF SE NA |
Sumitomo Chemical and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and BASF SE
The main advantage of trading using opposite Sumitomo Chemical and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo 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.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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