Correlation Between Asahi Kaisei and BASF SE

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

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

Diversification Opportunities for Asahi Kaisei and BASF SE

0.22

Correlation Coefficient

Asahi Kaisei  BASF SE

Modest diversification

The 3 months correlation between Asahi and BASF is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Kaisei Corp and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA and Asahi Kaisei 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 Asahi Kaisei 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 NA has no effect on the direction of Asahi Kaisei i.e., Asahi Kaisei and BASF SE go up and down completely randomly.

Pair Corralation between Asahi Kaisei and BASF SE

Assuming the 90 days horizon Asahi Kaisei Corp is expected to generate 0.34 times more return on investment than BASF SE. However, Asahi Kaisei Corp is 2.97 times less risky than BASF SE. It trades about 0.02 of its potential returns per unit of risk. BASF SE NA is currently generating about -0.09 per unit of risk. If you would invest  1,429  in Asahi Kaisei Corp on February 4, 2024 and sell it today you would earn a total of  7.00  from holding Asahi Kaisei Corp or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Asahi Kaisei Corp  vs.  BASF SE NA

Asahi Kaisei Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asahi Kaisei Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Asahi Kaisei is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BASF SE NA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE NA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asahi Kaisei and BASF SE

The main advantage of trading using opposite Asahi Kaisei and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asahi Kaisei 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 Asahi Kaisei Corp and BASF SE NA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.