Correlation Between Allianz SE and BASF SE

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

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

Diversification Opportunities for Allianz SE and BASF SE

0.91

Correlation Coefficient

Allianz SE  BASF SE

Almost no diversification

The 3 months correlation between Allianz and BASF is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Allianz SE 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 Allianz SE 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 Allianz SE i.e., Allianz SE and BASF SE go up and down completely randomly.

Pair Corralation between Allianz SE and BASF SE

Assuming the 90 days horizon Allianz SE is expected to generate 0.43 times more return on investment than BASF SE. However, Allianz SE is 2.34 times less risky than BASF SE. It trades about 0.34 of its potential returns per unit of risk. BASF SE is currently generating about 0.1 per unit of risk. If you would invest  29,560  in Allianz SE on December 29, 2024 and sell it today you would earn a total of  6,210  from holding Allianz SE or generate 21.01% return on investment over 90 days.

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

Allianz SE  vs.  BASF SE

Allianz SE

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz SE are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Allianz SE reported solid returns over the last few months and may actually be approaching a breakup point.

BASF SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allianz SE and BASF SE

The main advantage of trading using opposite Allianz SE and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz SE 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 Allianz SE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.