Correlation Between BASF SE and Magyar Telekom

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

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

Diversification Opportunities for BASF SE and Magyar Telekom

-0.3

Correlation Coefficient

BASF SE  Magyar Telekom

Very good diversification

The 3 months correlation between BASF and Magyar is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Magyar Telekom PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom PLC 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 Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom PLC has no effect on the direction of BASF SE i.e., BASF SE and Magyar Telekom go up and down completely randomly.

Pair Corralation between BASF SE and Magyar Telekom

Assuming the 90 days trading horizon BASF SE is expected to under-perform the Magyar Telekom. In addition to that, BASF SE is 1.04 times more volatile than Magyar Telekom PLC. It trades about -0.14 of its total potential returns per unit of risk. Magyar Telekom PLC is currently generating about 0.49 per unit of volatility. If you would invest  126,200  in Magyar Telekom PLC on October 20, 2024 and sell it today you would earn a total of  10,400  from holding Magyar Telekom PLC or generate 8.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.75%
Values	Daily Returns

BASF SE  vs.  Magyar Telekom PLC

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Magyar Telekom PLC

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom PLC are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Magyar Telekom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASF SE and Magyar Telekom

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

The idea behind BASF SE and Magyar Telekom PLC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.