Correlation Between Diversified Healthcare and BASF SE

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

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

Diversification Opportunities for Diversified Healthcare and BASF SE

0.31

Correlation Coefficient

Diversified Healthcare  BASF SE

Weak diversification

The 3 months correlation between Diversified and BASF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Healthcare Trust and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Diversified Healthcare 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 Diversified Healthcare Trust 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 Diversified Healthcare i.e., Diversified Healthcare and BASF SE go up and down completely randomly.

Pair Corralation between Diversified Healthcare and BASF SE

Assuming the 90 days horizon Diversified Healthcare Trust is expected to generate 2.93 times more return on investment than BASF SE. However, Diversified Healthcare is 2.93 times more volatile than BASF SE. It trades about 0.18 of its potential returns per unit of risk. BASF SE is currently generating about 0.05 per unit of risk. If you would invest  198.00  in Diversified Healthcare Trust on April 20, 2025 and sell it today you would earn a total of  111.00  from holding Diversified Healthcare Trust or generate 56.06% return on investment over 90 days.

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

Diversified Healthcare Trust  vs.  BASF SE

Diversified Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Healthcare Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Diversified Healthcare 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 Diversified Healthcare and BASF SE

The main advantage of trading using opposite Diversified Healthcare and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Healthcare 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 Diversified Healthcare Trust 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..