Correlation Between Voltage Metals and BASF SE

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

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

Diversification Opportunities for Voltage Metals and BASF SE

-0.7

Correlation Coefficient

Voltage Metals  BASF SE

Excellent diversification

The 3 months correlation between Voltage and BASF is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Voltage Metals Corp and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR and Voltage Metals 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 Voltage Metals Corp 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 ADR has no effect on the direction of Voltage Metals i.e., Voltage Metals and BASF SE go up and down completely randomly.

Pair Corralation between Voltage Metals and BASF SE

Assuming the 90 days horizon Voltage Metals Corp is expected to under-perform the BASF SE. In addition to that, Voltage Metals is 3.73 times more volatile than BASF SE ADR. It trades about -0.13 of its total potential returns per unit of risk. BASF SE ADR is currently generating about 0.2 per unit of volatility. If you would invest  1,102  in BASF SE ADR on December 20, 2024 and sell it today you would earn a total of  352.00  from holding BASF SE ADR or generate 31.94% return on investment over 90 days.

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

Voltage Metals Corp  vs.  BASF SE ADR

Voltage Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Voltage Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BASF SE ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, BASF SE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Voltage Metals and BASF SE

The main advantage of trading using opposite Voltage Metals and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voltage Metals 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 Voltage Metals Corp and BASF SE ADR 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.