Correlation Between Chemtrade Logistics and BASF SE

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

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

Diversification Opportunities for Chemtrade Logistics and BASF SE

-0.18

Correlation Coefficient

Chemtrade Logistics  BASF SE

Good diversification

The 3 months correlation between Chemtrade and BASF is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income 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 Chemtrade Logistics 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 Chemtrade Logistics Income 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 Chemtrade Logistics i.e., Chemtrade Logistics and BASF SE go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and BASF SE

Assuming the 90 days horizon Chemtrade Logistics Income is expected to generate 0.66 times more return on investment than BASF SE. However, Chemtrade Logistics Income is 1.52 times less risky than BASF SE. It trades about 0.08 of its potential returns per unit of risk. BASF SE NA is currently generating about -0.02 per unit of risk. If you would invest  657.00  in Chemtrade Logistics Income on September 23, 2024 and sell it today you would earn a total of  93.00  from holding Chemtrade Logistics Income or generate 14.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Chemtrade Logistics Income  vs.  BASF SE NA

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

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

BASF SE NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE NA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chemtrade Logistics and BASF SE

The main advantage of trading using opposite Chemtrade Logistics and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemtrade Logistics 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 Chemtrade Logistics Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.