Correlation Between Siemens Aktiengesellscha and BASF SE

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

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

Diversification Opportunities for Siemens Aktiengesellscha and BASF SE

0.96

Correlation Coefficient

Siemens Aktiengesellscha  BASF SE

Almost no diversification

The 3 months correlation between Siemens and BASF is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Aktiengesellschaft and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Siemens Aktiengesellscha 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 Siemens Aktiengesellschaft 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 Siemens Aktiengesellscha i.e., Siemens Aktiengesellscha and BASF SE go up and down completely randomly.

Pair Corralation between Siemens Aktiengesellscha and BASF SE

Assuming the 90 days horizon Siemens Aktiengesellschaft is expected to generate 0.82 times more return on investment than BASF SE. However, Siemens Aktiengesellschaft is 1.21 times less risky than BASF SE. It trades about 0.17 of its potential returns per unit of risk. BASF SE is currently generating about 0.1 per unit of risk. If you would invest  18,504  in Siemens Aktiengesellschaft on December 29, 2024 and sell it today you would earn a total of  3,571  from holding Siemens Aktiengesellschaft or generate 19.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Siemens Aktiengesellschaft  vs.  BASF SE

Siemens Aktiengesellscha

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Siemens Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly fragile basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Aktiengesellscha and BASF SE

The main advantage of trading using opposite Siemens Aktiengesellscha and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Aktiengesellscha 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 Siemens Aktiengesellschaft 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.