Correlation Between REX American and Minerals Technologies
Can any of the company-specific risk be diversified away by investing in both REX American 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 REX American and Minerals Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Minerals Technologies, you can compare the effects of market volatilities on REX American 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 REX American with a short position of Minerals Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Minerals Technologies.
Diversification Opportunities for REX American and Minerals Technologies
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between REX and Minerals is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies and REX American 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 REX American Resources 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 REX American i.e., REX American and Minerals Technologies go up and down completely randomly.
Pair Corralation between REX American and Minerals Technologies
Considering the 90-day investment horizon REX American Resources is expected to generate 1.66 times more return on investment than Minerals Technologies. However, REX American is 1.66 times more volatile than Minerals Technologies. It trades about 0.04 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.05 per unit of risk. If you would invest 2,860 in REX American Resources on August 28, 2024 and sell it today you would earn a total of 1,603 from holding REX American Resources or generate 56.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Minerals Technologies
Performance |
| Timeline |
| REX American Resources |
| Minerals Technologies |
REX American and Minerals Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Minerals Technologies
The main advantage of trading using opposite REX American and Minerals Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American 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.| REX American vs. Lsb Industries | REX American vs. AdvanSix | REX American vs. Tronox Holdings PLC | REX American vs. Methanex |
| Minerals Technologies vs. Oil Dri | Minerals Technologies vs. H B Fuller | Minerals Technologies vs. Northern Technologies | Minerals Technologies vs. Cabot |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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