Correlation Between Green Plains and BASF SE

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

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

Diversification Opportunities for Green Plains and BASF SE

-0.88

Correlation Coefficient

Green Plains  BASF SE

Pay attention - limited upside

The 3 months correlation between Green and BASF is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Renewable 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 Green Plains 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 Green Plains Renewable 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 Green Plains i.e., Green Plains and BASF SE go up and down completely randomly.

Pair Corralation between Green Plains and BASF SE

Given the investment horizon of 90 days Green Plains Renewable is expected to under-perform the BASF SE. In addition to that, Green Plains is 1.43 times more volatile than BASF SE NA. It trades about -0.17 of its total potential returns per unit of risk. BASF SE NA is currently generating about 0.1 per unit of volatility. If you would invest  4,440  in BASF SE NA on December 28, 2024 and sell it today you would earn a total of  867.00  from holding BASF SE NA or generate 19.53% return on investment over 90 days.

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

Green Plains Renewable  vs.  BASF SE NA

Green Plains Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Plains Renewable 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 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 Green Plains and BASF SE

The main advantage of trading using opposite Green Plains and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Plains 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 Green Plains Renewable 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.