Correlation Between BASF SE and Deutsche Lufthansa

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

By analyzing existing cross correlation between BASF SE and Deutsche Lufthansa AG, you can compare the effects of market volatilities on BASF SE and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and Deutsche Lufthansa.

Diversification Opportunities for BASF SE and Deutsche Lufthansa

-0.24

Correlation Coefficient

BASF SE  Deutsche Lufthansa

Very good diversification

The 3 months correlation between BASF and Deutsche is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of BASF SE i.e., BASF SE and Deutsche Lufthansa go up and down completely randomly.

Pair Corralation between BASF SE and Deutsche Lufthansa

Assuming the 90 days horizon BASF SE is expected to generate 4.87 times less return on investment than Deutsche Lufthansa. But when comparing it to its historical volatility, BASF SE is 1.41 times less risky than Deutsche Lufthansa. It trades about 0.05 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  614.00  in Deutsche Lufthansa AG on April 23, 2025 and sell it today you would earn a total of  132.00  from holding Deutsche Lufthansa AG or generate 21.5% return on investment over 90 days.

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

BASF SE  vs.  Deutsche Lufthansa AG

BASF SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BASF SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Lufthansa

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Lufthansa AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deutsche Lufthansa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASF SE and Deutsche Lufthansa

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

The idea behind BASF SE and Deutsche Lufthansa AG 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.