Correlation Between Shin Etsu and BASF SE

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

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

Diversification Opportunities for Shin Etsu and BASF SE

0.27

Correlation Coefficient

Shin Etsu  BASF SE

Modest diversification

The 3 months correlation between Shin and BASF is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Shin Etsu 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 Shin Etsu Chemical Co 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 Shin Etsu i.e., Shin Etsu and BASF SE go up and down completely randomly.

Pair Corralation between Shin Etsu and BASF SE

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.77 times more return on investment than BASF SE. However, Shin Etsu is 1.77 times more volatile than BASF SE. It trades about 0.08 of its potential returns per unit of risk. BASF SE is currently generating about 0.1 per unit of risk. If you would invest  2,479  in Shin Etsu Chemical Co on April 15, 2025 and sell it today you would earn a total of  288.00  from holding Shin Etsu Chemical Co or generate 11.62% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  BASF SE

Shin Etsu Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Etsu Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shin Etsu reported solid returns over the last few months and may actually be approaching a breakup point.

BASF SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BASF SE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Shin Etsu and BASF SE

The main advantage of trading using opposite Shin Etsu and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu 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 Shin Etsu Chemical Co 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .