Correlation Between United States and BASF SE
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and BASF SE, you can compare the effects of market volatilities on United States 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 United States with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and BASF SE.
Diversification Opportunities for United States and BASF SE
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between United and BASF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and United States 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 United States Steel 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 United States i.e., United States and BASF SE go up and down completely randomly.
Pair Corralation between United States and BASF SE
Given the investment horizon of 90 days United States Steel is expected to generate 5.77 times more return on investment than BASF SE. However, United States is 5.77 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 0.02 per unit of risk. If you would invest 38,679 in United States Steel on September 2, 2024 and sell it today you would earn a total of 43,731 from holding United States Steel or generate 113.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. BASF SE
Performance |
| Timeline |
| United States Steel |
| BASF SE |
United States and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and BASF SE
The main advantage of trading using opposite United States and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel and BASF SE 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. Costco Wholesale | BASF SE vs. United States Steel | BASF SE vs. GMxico Transportes SAB | BASF SE vs. Genworth Financial |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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