Correlation Between Ganfeng Lithium and BASF SE

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

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

Diversification Opportunities for Ganfeng Lithium and BASF SE

0.58

Correlation Coefficient

Ganfeng Lithium  BASF SE

Very weak diversification

The 3 months correlation between Ganfeng and BASF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ganfeng Lithium Co and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Ganfeng Lithium 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 Ganfeng Lithium 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 has no effect on the direction of Ganfeng Lithium i.e., Ganfeng Lithium and BASF SE go up and down completely randomly.

Pair Corralation between Ganfeng Lithium and BASF SE

Assuming the 90 days trading horizon Ganfeng Lithium is expected to generate 15.01 times less return on investment than BASF SE. But when comparing it to its historical volatility, Ganfeng Lithium Co is 1.12 times less risky than BASF SE. It trades about 0.01 of its potential returns per unit of risk. BASF SE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,040  in BASF SE on December 30, 2024 and sell it today you would earn a total of  140.00  from holding BASF SE or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ganfeng Lithium Co  vs.  BASF SE

Ganfeng Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ganfeng Lithium Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ganfeng Lithium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BASF SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ganfeng Lithium and BASF SE

The main advantage of trading using opposite Ganfeng Lithium and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ganfeng Lithium 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 Ganfeng Lithium Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.