Correlation Between PT Astra and BASF SE

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

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

Diversification Opportunities for PT Astra and BASF SE

-0.33

Correlation Coefficient

PT Astra  BASF SE

Very good diversification

The 3 months correlation between PTAIF and BASF is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR and PT Astra 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 Astra International 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 ADR has no effect on the direction of PT Astra i.e., PT Astra and BASF SE go up and down completely randomly.

Pair Corralation between PT Astra and BASF SE

Assuming the 90 days horizon PT Astra International is expected to generate 1.01 times more return on investment than BASF SE. However, PT Astra is 1.01 times more volatile than BASF SE ADR. It trades about 0.21 of its potential returns per unit of risk. BASF SE ADR is currently generating about -0.06 per unit of risk. If you would invest  29.00  in PT Astra International on September 3, 2024 and sell it today you would earn a total of  8.00  from holding PT Astra International or generate 27.59% return on investment over 90 days.

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

PT Astra International  vs.  BASF SE ADR

PT Astra International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, PT Astra reported solid returns over the last few months and may actually be approaching a breakup point.

BASF SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PT Astra and BASF SE

The main advantage of trading using opposite PT Astra and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Astra 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 PT Astra International and BASF SE ADR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.