Correlation Between BASF SE and SGL Carbon

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

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

Diversification Opportunities for BASF SE and SGL Carbon

0.0

Correlation Coefficient

BASF SE  SGL Carbon

Pay attention - limited upside

The 3 months correlation between BASF and SGL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and SGL Carbon SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGL Carbon SE and BASF SE 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 BASF SE are associated (or correlated) with SGL Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGL Carbon SE has no effect on the direction of BASF SE i.e., BASF SE and SGL Carbon go up and down completely randomly.

Pair Corralation between BASF SE and SGL Carbon

If you would invest  1,187  in BASF SE on February 2, 2024 and sell it today you would earn a total of  23.00  from holding BASF SE or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

BASF SE  vs.  SGL Carbon SE

BASF SE

Risk-Adjusted Performance

7 of 100

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

SGL Carbon SE

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days SGL Carbon SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SGL Carbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BASF SE and SGL Carbon

The main advantage of trading using opposite BASF SE and SGL Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, SGL Carbon 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 SGL Carbon will offset losses from the drop in SGL Carbon's long position.

The idea behind BASF SE and SGL Carbon 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.