Correlation Between Celanese and BASF SE

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

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

Diversification Opportunities for Celanese and BASF SE

-0.69

Correlation Coefficient

Celanese  BASF SE

Excellent diversification

The 3 months correlation between Celanese and BASF is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Celanese and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA and Celanese 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 Celanese 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 NA has no effect on the direction of Celanese i.e., Celanese and BASF SE go up and down completely randomly.

Pair Corralation between Celanese and BASF SE

Allowing for the 90-day total investment horizon Celanese is expected to under-perform the BASF SE. In addition to that, Celanese is 1.23 times more volatile than BASF SE NA. It trades about -0.05 of its total potential returns per unit of risk. BASF SE NA is currently generating about 0.11 per unit of volatility. If you would invest  4,440  in BASF SE NA on December 29, 2024 and sell it today you would earn a total of  906.00  from holding BASF SE NA or generate 20.41% return on investment over 90 days.

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

Celanese  vs.  BASF SE NA

Celanese

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 8 (%) 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.

Pair Trading with Celanese and BASF SE

The main advantage of trading using opposite Celanese and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celanese 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 Celanese and BASF SE NA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.