Correlation Between MOL Nyrt and BASF SE

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

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

Diversification Opportunities for MOL Nyrt and BASF SE

0.22

Correlation Coefficient

MOL Nyrt  BASF SE

Modest diversification

The 3 months correlation between MOL and BASF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MOL Nyrt and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and MOL Nyrt 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 MOL Nyrt 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 MOL Nyrt i.e., MOL Nyrt and BASF SE go up and down completely randomly.

Pair Corralation between MOL Nyrt and BASF SE

Assuming the 90 days trading horizon MOL Nyrt is expected to generate 3.65 times less return on investment than BASF SE. But when comparing it to its historical volatility, MOL Nyrt is 3.17 times less risky than BASF SE. It trades about 0.05 of its potential returns per unit of risk. BASF SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,799,400  in BASF SE on September 14, 2024 and sell it today you would earn a total of  65,000  from holding BASF SE or generate 3.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.44%
Values	Daily Returns

MOL Nyrt  vs.  BASF SE

MOL Nyrt

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MOL Nyrt are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, MOL Nyrt is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BASF SE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days BASF SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, BASF SE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MOL Nyrt and BASF SE

The main advantage of trading using opposite MOL Nyrt and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MOL Nyrt 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 MOL Nyrt 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.