Correlation Between BASF SE and Minerals Technologies

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

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

Diversification Opportunities for BASF SE and Minerals Technologies

-0.33

Correlation Coefficient

BASF SE  Minerals Technologies

Very good diversification

The 3 months correlation between BASF and Minerals is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of BASF SE i.e., BASF SE and Minerals Technologies go up and down completely randomly.

Pair Corralation between BASF SE and Minerals Technologies

Assuming the 90 days trading horizon BASF SE is expected to generate 3.73 times less return on investment than Minerals Technologies. But when comparing it to its historical volatility, BASF SE is 1.15 times less risky than Minerals Technologies. It trades about 0.02 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,105  in Minerals Technologies on October 22, 2024 and sell it today you would earn a total of  2,195  from holding Minerals Technologies or generate 43.0% return on investment over 90 days.

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

BASF SE  vs.  Minerals Technologies

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Minerals Technologies

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Minerals Technologies 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 Minerals Technologies

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

The idea behind BASF SE and Minerals Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.