Correlation Between BASF SE and UNIVERSAL DISPLAY

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

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

Diversification Opportunities for BASF SE and UNIVERSAL DISPLAY

0.22

Correlation Coefficient

BASF SE  UNIVERSAL DISPLAY

Modest diversification

The 3 months correlation between BASF and UNIVERSAL is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and UNIVERSAL DISPLAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL DISPLAY has no effect on the direction of BASF SE i.e., BASF SE and UNIVERSAL DISPLAY go up and down completely randomly.

Pair Corralation between BASF SE and UNIVERSAL DISPLAY

Assuming the 90 days trading horizon BASF SE is expected to generate 1.33 times more return on investment than UNIVERSAL DISPLAY. However, BASF SE is 1.33 times more volatile than UNIVERSAL DISPLAY. It trades about 0.03 of its potential returns per unit of risk. UNIVERSAL DISPLAY is currently generating about -0.05 per unit of risk. If you would invest  4,208  in BASF SE on April 19, 2025 and sell it today you would earn a total of  45.00  from holding BASF SE or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

BASF SE  vs.  UNIVERSAL DISPLAY

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. In spite of comparatively stable basic indicators, BASF SE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

UNIVERSAL DISPLAY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL DISPLAY are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, UNIVERSAL DISPLAY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASF SE and UNIVERSAL DISPLAY

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

The idea behind BASF SE and UNIVERSAL DISPLAY 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.