Correlation Between BASF SE and PT Barito

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

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

Diversification Opportunities for BASF SE and PT Barito

0.36

Correlation Coefficient

BASF SE  PT Barito

Weak diversification

The 3 months correlation between BASF and OB8 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE 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 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 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 BASF SE i.e., BASF SE and PT Barito go up and down completely randomly.

Pair Corralation between BASF SE and PT Barito

Assuming the 90 days horizon BASF SE is expected to under-perform the PT Barito. But the stock apears to be less risky and, when comparing its historical volatility, BASF SE is 4.78 times less risky than PT Barito. The stock trades about -0.07 of its potential returns per unit of risk. The PT Barito Pacific is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4.70  in PT Barito Pacific on September 5, 2024 and sell it today you would lose (0.50) from holding PT Barito Pacific or give up 10.64% of portfolio value over 90 days.

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

BASF SE  vs.  PT Barito Pacific

BASF SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BASF SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BASF SE and PT Barito

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

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.