Correlation Between BASF SE and Siemens Aktiengesellscha

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

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

Diversification Opportunities for BASF SE and Siemens Aktiengesellscha

-0.14

Correlation Coefficient

BASF SE  Siemens Aktiengesellscha

Good diversification

The 3 months correlation between BASF and Siemens is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Siemens Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Aktiengesellscha 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 Siemens Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Aktiengesellscha has no effect on the direction of BASF SE i.e., BASF SE and Siemens Aktiengesellscha go up and down completely randomly.

Pair Corralation between BASF SE and Siemens Aktiengesellscha

Assuming the 90 days horizon BASF SE is expected to under-perform the Siemens Aktiengesellscha. In addition to that, BASF SE is 1.04 times more volatile than Siemens Aktiengesellschaft. It trades about 0.0 of its total potential returns per unit of risk. Siemens Aktiengesellschaft is currently generating about 0.06 per unit of volatility. If you would invest  12,766  in Siemens Aktiengesellschaft on September 26, 2024 and sell it today you would earn a total of  6,192  from holding Siemens Aktiengesellschaft or generate 48.5% return on investment over 90 days.

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

BASF SE  vs.  Siemens Aktiengesellschaft

BASF SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Siemens Aktiengesellscha

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Siemens Aktiengesellscha is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BASF SE and Siemens Aktiengesellscha

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

The idea behind BASF SE and Siemens Aktiengesellschaft 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.