Correlation Between NordTelekom Telecommunicatio and BASF SE

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

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

Diversification Opportunities for NordTelekom Telecommunicatio and BASF SE

0.05

Correlation Coefficient

NordTelekom Telecommunicatio  BASF SE

Significant diversification

The 3 months correlation between NordTelekom and BASF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NordTelekom Telecommunications and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and NordTelekom Telecommunicatio 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 NordTelekom Telecommunications Service 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 NordTelekom Telecommunicatio i.e., NordTelekom Telecommunicatio and BASF SE go up and down completely randomly.

Pair Corralation between NordTelekom Telecommunicatio and BASF SE

Assuming the 90 days trading horizon NordTelekom Telecommunications Service is expected to under-perform the BASF SE. In addition to that, NordTelekom Telecommunicatio is 1.75 times more volatile than BASF SE. It trades about -0.01 of its total potential returns per unit of risk. BASF SE is currently generating about 0.08 per unit of volatility. If you would invest  1,558,167  in BASF SE on September 14, 2024 and sell it today you would earn a total of  306,233  from holding BASF SE or generate 19.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	48.63%
Values	Daily Returns

NordTelekom Telecommunications  vs.  BASF SE

NordTelekom Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NordTelekom Telecommunications Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 NordTelekom Telecommunicatio and BASF SE

The main advantage of trading using opposite NordTelekom Telecommunicatio and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NordTelekom Telecommunicatio 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 NordTelekom Telecommunications Service 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.