Correlation Between Air Products and PT Barito

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

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

Diversification Opportunities for Air Products and PT Barito

-0.66

Correlation Coefficient

Air Products  PT Barito

Excellent diversification

The 3 months correlation between Air and OB8 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and PT Barito Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Barito Pacific and Air Products 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 Air Products and are associated (or correlated) with PT Barito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Barito Pacific has no effect on the direction of Air Products i.e., Air Products and PT Barito go up and down completely randomly.

Pair Corralation between Air Products and PT Barito

Assuming the 90 days horizon Air Products and is expected to generate 0.26 times more return on investment than PT Barito. However, Air Products and is 3.84 times less risky than PT Barito. It trades about 0.08 of its potential returns per unit of risk. PT Barito Pacific is currently generating about -0.03 per unit of risk. If you would invest  25,780  in Air Products and on September 22, 2024 and sell it today you would earn a total of  2,420  from holding Air Products and or generate 9.39% return on investment over 90 days.

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

Air Products and  vs.  PT Barito Pacific

Air Products

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Barito Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Barito Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Air Products and PT Barito

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

The idea behind Air Products and and PT Barito Pacific 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.