Correlation Between PT Barito and Mapfre SA

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

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

Diversification Opportunities for PT Barito and Mapfre SA

-0.66

Correlation Coefficient

PT Barito  Mapfre SA

Excellent diversification

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

Pair Corralation between PT Barito and Mapfre SA

Assuming the 90 days horizon PT Barito Pacific is expected to generate 4.69 times more return on investment than Mapfre SA. However, PT Barito is 4.69 times more volatile than Mapfre SA. It trades about -0.02 of its potential returns per unit of risk. Mapfre SA is currently generating about -0.17 per unit of risk. If you would invest  4.10  in PT Barito Pacific on September 22, 2024 and sell it today you would lose (0.20) from holding PT Barito Pacific or give up 4.88% of portfolio value over 90 days.

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

PT Barito Pacific  vs.  Mapfre SA

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.

Mapfre SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mapfre SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Barito and Mapfre SA

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

The idea behind PT Barito Pacific and Mapfre SA 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.