Correlation Between Guangdong Investment and BASF SE

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

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

Diversification Opportunities for Guangdong Investment and BASF SE

0.09

Correlation Coefficient

Guangdong Investment  BASF SE

Significant diversification

The 3 months correlation between Guangdong and BASF is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Guangdong Investment 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 Guangdong Investment Limited 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 has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and BASF SE go up and down completely randomly.

Pair Corralation between Guangdong Investment and BASF SE

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 1.46 times more return on investment than BASF SE. However, Guangdong Investment is 1.46 times more volatile than BASF SE. It trades about 0.1 of its potential returns per unit of risk. BASF SE is currently generating about 0.05 per unit of risk. If you would invest  64.00  in Guangdong Investment Limited on April 20, 2025 and sell it today you would earn a total of  8.00  from holding Guangdong Investment Limited or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Guangdong Investment Limited  vs.  BASF SE

Guangdong Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Guangdong Investment and BASF SE

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