Correlation Between BASF SE and E I

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

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

Diversification Opportunities for BASF SE and E I

0.78

Correlation Coefficient

BASF SE  E I

Poor diversification

The 3 months correlation between BASF and CTA-PA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA and E I du in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E I du 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 NA are associated (or correlated) with E I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E I du has no effect on the direction of BASF SE i.e., BASF SE and E I go up and down completely randomly.

Pair Corralation between BASF SE and E I

Assuming the 90 days horizon BASF SE NA is expected to generate 1.95 times more return on investment than E I. However, BASF SE is 1.95 times more volatile than E I du. It trades about 0.13 of its potential returns per unit of risk. E I du is currently generating about 0.01 per unit of risk. If you would invest  4,558  in BASF SE NA on November 28, 2024 and sell it today you would earn a total of  792.00  from holding BASF SE NA or generate 17.38% return on investment over 90 days.

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

BASF SE NA  vs.  E I du

BASF SE NA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE NA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

E I du

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E I du are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BASF SE and E I

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

The idea behind BASF SE NA and E I du 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.