Correlation Between BASF SE and Vonovia SE

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

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

Diversification Opportunities for BASF SE and Vonovia SE

-0.37

Correlation Coefficient

BASF SE  Vonovia SE

Very good diversification

The 3 months correlation between BASF and Vonovia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of BASF SE i.e., BASF SE and Vonovia SE go up and down completely randomly.

Pair Corralation between BASF SE and Vonovia SE

Assuming the 90 days horizon BASF SE is expected to generate 1.31 times less return on investment than Vonovia SE. In addition to that, BASF SE is 1.01 times more volatile than Vonovia SE. It trades about 0.04 of its total potential returns per unit of risk. Vonovia SE is currently generating about 0.05 per unit of volatility. If you would invest  2,697  in Vonovia SE on April 20, 2025 and sell it today you would earn a total of  108.00  from holding Vonovia SE or generate 4.0% 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.  Vonovia SE

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.

Vonovia SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vonovia SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vonovia SE 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 Vonovia SE

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

The idea behind BASF SE and Vonovia 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.