Correlation Between Ganfeng Lithium and BASF SE

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

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

Diversification Opportunities for Ganfeng Lithium and BASF SE

-0.34

Correlation Coefficient

Ganfeng Lithium  BASF SE

Very good diversification

The 3 months correlation between Ganfeng and BASF is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ganfeng Lithium Co 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 Ganfeng Lithium 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 Ganfeng Lithium Co 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 Ganfeng Lithium i.e., Ganfeng Lithium and BASF SE go up and down completely randomly.

Pair Corralation between Ganfeng Lithium and BASF SE

Assuming the 90 days horizon Ganfeng Lithium Co is expected to generate 2.32 times more return on investment than BASF SE. However, Ganfeng Lithium is 2.32 times more volatile than BASF SE NA. It trades about 0.05 of its potential returns per unit of risk. BASF SE NA is currently generating about -0.07 per unit of risk. If you would invest  244.00  in Ganfeng Lithium Co on September 24, 2024 and sell it today you would earn a total of  21.00  from holding Ganfeng Lithium Co or generate 8.61% return on investment over 90 days.

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

Ganfeng Lithium Co  vs.  BASF SE NA

Ganfeng Lithium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ganfeng Lithium Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ganfeng Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

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 Ganfeng Lithium and BASF SE

The main advantage of trading using opposite Ganfeng Lithium and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ganfeng Lithium 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 Ganfeng Lithium Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.