Correlation Between Infineon Technologies and BASF SE

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

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

Diversification Opportunities for Infineon Technologies and BASF SE

0.44

Correlation Coefficient

Infineon Technologies  BASF SE

Very weak diversification

The 3 months correlation between Infineon and BASF is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Infineon Technologies 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 Infineon Technologies AG 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 Infineon Technologies i.e., Infineon Technologies and BASF SE go up and down completely randomly.

Pair Corralation between Infineon Technologies and BASF SE

Assuming the 90 days trading horizon Infineon Technologies is expected to generate 28.36 times less return on investment than BASF SE. In addition to that, Infineon Technologies is 1.09 times more volatile than BASF SE. It trades about 0.0 of its total potential returns per unit of risk. BASF SE is currently generating about 0.1 per unit of volatility. If you would invest  1,759,800  in BASF SE on December 31, 2024 and sell it today you would earn a total of  170,200  from holding BASF SE or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.55%
Values	Daily Returns

Infineon Technologies AG  vs.  BASF SE

Infineon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infineon Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Infineon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BASF SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BASF SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infineon Technologies and BASF SE

The main advantage of trading using opposite Infineon Technologies and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infineon Technologies 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 Infineon Technologies AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..