Correlation Between NEW MILLENNIUM and BASF SE

Can any of the company-specific risk be diversified away by investing in both NEW MILLENNIUM 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 NEW MILLENNIUM and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NEW MILLENNIUM IRON and BASF SE, you can compare the effects of market volatilities on NEW MILLENNIUM 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 NEW MILLENNIUM with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and BASF SE.

Diversification Opportunities for NEW MILLENNIUM and BASF SE

-0.86

Correlation Coefficient

NEW MILLENNIUM  BASF SE

Pay attention - limited upside

The 3 months correlation between NEW and BASF is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and NEW MILLENNIUM 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 NEW MILLENNIUM IRON 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 NEW MILLENNIUM i.e., NEW MILLENNIUM and BASF SE go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and BASF SE

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the BASF SE. But the stock apears to be less risky and, when comparing its historical volatility, NEW MILLENNIUM IRON is 1.33 times less risky than BASF SE. The stock trades about -0.1 of its potential returns per unit of risk. The BASF SE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,050  in BASF SE on December 20, 2024 and sell it today you would earn a total of  240.00  from holding BASF SE or generate 22.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

NEW MILLENNIUM IRON  vs.  BASF SE

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BASF SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and BASF SE

The main advantage of trading using opposite NEW MILLENNIUM and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEW MILLENNIUM 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 NEW MILLENNIUM IRON 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.