Correlation Between Cantex Mine and BASF SE

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

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

Diversification Opportunities for Cantex Mine and BASF SE

0.68

Correlation Coefficient

Cantex Mine  BASF SE

Poor diversification

The 3 months correlation between Cantex and BASF is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cantex Mine Development 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 Cantex Mine 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 Cantex Mine Development 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 Cantex Mine i.e., Cantex Mine and BASF SE go up and down completely randomly.

Pair Corralation between Cantex Mine and BASF SE

Assuming the 90 days horizon Cantex Mine Development is expected to generate 3.62 times more return on investment than BASF SE. However, Cantex Mine is 3.62 times more volatile than BASF SE ADR. It trades about 0.1 of its potential returns per unit of risk. BASF SE ADR is currently generating about 0.2 per unit of risk. If you would invest  8.00  in Cantex Mine Development on December 20, 2024 and sell it today you would earn a total of  3.00  from holding Cantex Mine Development or generate 37.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Cantex Mine Development  vs.  BASF SE ADR

Cantex Mine Development

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cantex Mine Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Cantex Mine reported solid returns over the last few months and may actually be approaching a breakup point.

BASF SE ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, BASF SE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cantex Mine and BASF SE

The main advantage of trading using opposite Cantex Mine and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cantex Mine 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 Cantex Mine Development 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..