Correlation Between OTP Bank and BASF SE

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

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

Diversification Opportunities for OTP Bank and BASF SE

0.35

Correlation Coefficient

OTP Bank  BASF SE

Weak diversification

The 3 months correlation between OTP and BASF is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and OTP Bank 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 OTP Bank Nyrt 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 has no effect on the direction of OTP Bank i.e., OTP Bank and BASF SE go up and down completely randomly.

Pair Corralation between OTP Bank and BASF SE

Assuming the 90 days trading horizon OTP Bank Nyrt is expected to generate 0.59 times more return on investment than BASF SE. However, OTP Bank Nyrt is 1.68 times less risky than BASF SE. It trades about 0.18 of its potential returns per unit of risk. BASF SE is currently generating about 0.1 per unit of risk. If you would invest  2,169,000  in OTP Bank Nyrt on December 28, 2024 and sell it today you would earn a total of  428,000  from holding OTP Bank Nyrt or generate 19.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	61.9%
Values	Daily Returns

OTP Bank Nyrt  vs.  BASF SE

OTP Bank Nyrt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

BASF SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BASF SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and BASF SE

The main advantage of trading using opposite OTP Bank and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank 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 OTP Bank Nyrt and BASF SE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..