Correlation Between BASF SE and Sociedad Qumica

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

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

Diversification Opportunities for BASF SE and Sociedad Qumica

0.3

Correlation Coefficient

BASF SE  Sociedad Qumica

Weak diversification

The 3 months correlation between BASF and Sociedad is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of BASF SE i.e., BASF SE and Sociedad Qumica go up and down completely randomly.

Pair Corralation between BASF SE and Sociedad Qumica

Assuming the 90 days horizon BASF SE is expected to generate 2.74 times less return on investment than Sociedad Qumica. But when comparing it to its historical volatility, BASF SE is 1.88 times less risky than Sociedad Qumica. It trades about 0.04 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,130  in Sociedad Qumica y on April 21, 2025 and sell it today you would earn a total of  240.00  from holding Sociedad Qumica y or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BASF SE  vs.  Sociedad Qumica y

BASF SE

Risk-Adjusted Performance

Insignificant

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.

Sociedad Qumica y

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sociedad Qumica may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BASF SE and Sociedad Qumica

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

The idea behind BASF SE and Sociedad Qumica y 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.