Correlation Between Bellring Brands and BASF SE

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

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

Diversification Opportunities for Bellring Brands and BASF SE

-0.48

Correlation Coefficient

Bellring Brands  BASF SE

Very good diversification

The 3 months correlation between Bellring and BASF is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bellring Brands LLC and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Bellring Brands 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 Bellring Brands LLC 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 Bellring Brands i.e., Bellring Brands and BASF SE go up and down completely randomly.

Pair Corralation between Bellring Brands and BASF SE

Given the investment horizon of 90 days Bellring Brands LLC is expected to under-perform the BASF SE. But the stock apears to be less risky and, when comparing its historical volatility, Bellring Brands LLC is 1.16 times less risky than BASF SE. The stock trades about 0.0 of its potential returns per unit of risk. The BASF SE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,246  in BASF SE on December 30, 2024 and sell it today you would earn a total of  498.00  from holding BASF SE or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Bellring Brands LLC  vs.  BASF SE

Bellring Brands LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bellring Brands LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Bellring Brands is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

BASF SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BASF SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bellring Brands and BASF SE

The main advantage of trading using opposite Bellring Brands and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellring Brands 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 Bellring Brands LLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.