Correlation Between BASF SE and PTT GLBL

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

By analyzing existing cross correlation between BASF SE and PTT GLBL CHEM NVDR , you can compare the effects of market volatilities on BASF SE and PTT GLBL 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 PTT GLBL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and PTT GLBL.

Diversification Opportunities for BASF SE and PTT GLBL

0.6

Correlation Coefficient

BASF SE  PTT GLBL

Poor diversification

The 3 months correlation between BASF and PTT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and PTT GLBL CHEM NVDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT GLBL CHEM 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 PTT GLBL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT GLBL CHEM has no effect on the direction of BASF SE i.e., BASF SE and PTT GLBL go up and down completely randomly.

Pair Corralation between BASF SE and PTT GLBL

Assuming the 90 days trading horizon BASF SE is expected to generate 0.8 times more return on investment than PTT GLBL. However, BASF SE is 1.24 times less risky than PTT GLBL. It trades about -0.04 of its potential returns per unit of risk. PTT GLBL CHEM NVDR is currently generating about -0.04 per unit of risk. If you would invest  4,501  in BASF SE on September 5, 2024 and sell it today you would lose (106.00) from holding BASF SE or give up 2.36% of portfolio value over 90 days.

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

BASF SE  vs.  PTT GLBL CHEM NVDR

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. In spite of comparatively stable basic indicators, BASF SE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PTT GLBL CHEM

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with BASF SE and PTT GLBL

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

The idea behind BASF SE and PTT GLBL CHEM NVDR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.