Correlation Between BASF SE and Rayonier Advanced

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

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

Diversification Opportunities for BASF SE and Rayonier Advanced

-0.69

Correlation Coefficient

BASF SE  Rayonier Advanced

Excellent diversification

The 3 months correlation between BASF and Rayonier is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced and BASF 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 BASF SE are associated (or correlated) with Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of BASF SE i.e., BASF SE and Rayonier Advanced go up and down completely randomly.

Pair Corralation between BASF SE and Rayonier Advanced

Assuming the 90 days horizon BASF SE is expected to generate 0.52 times more return on investment than Rayonier Advanced. However, BASF SE is 1.94 times less risky than Rayonier Advanced. It trades about 0.14 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about -0.13 per unit of risk. If you would invest  4,252  in BASF SE on December 26, 2024 and sell it today you would earn a total of  758.00  from holding BASF SE or generate 17.83% return on investment over 90 days.

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

BASF SE  vs.  Rayonier Advanced Materials

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 fragile basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Rayonier Advanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BASF SE and Rayonier Advanced

The main advantage of trading using opposite BASF SE and Rayonier Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, Rayonier Advanced 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 Rayonier Advanced will offset losses from the drop in Rayonier Advanced's long position.

The idea behind BASF SE and Rayonier Advanced Materials 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.