Correlation Between Minerals Technologies and BK Technologies

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Can any of the company-specific risk be diversified away by investing in both Minerals Technologies and BK 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 Minerals Technologies and BK Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Minerals Technologies and BK Technologies, you can compare the effects of market volatilities on Minerals Technologies and BK 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 Minerals Technologies with a short position of BK Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Minerals Technologies and BK Technologies.

Diversification Opportunities for Minerals Technologies and BK Technologies

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Minerals and BKTI is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies and Minerals Technologies 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 Minerals Technologies are associated (or correlated) with BK Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Technologies has no effect on the direction of Minerals Technologies i.e., Minerals Technologies and BK Technologies go up and down completely randomly.

Pair Corralation between Minerals Technologies and BK Technologies

Considering the 90-day investment horizon Minerals Technologies is expected to generate 6.89 times less return on investment than BK Technologies. But when comparing it to its historical volatility, Minerals Technologies is 2.76 times less risky than BK Technologies. It trades about 0.05 of its potential returns per unit of risk. BK Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,201  in BK Technologies on February 2, 2024 and sell it today you would earn a total of  250.00  from holding BK Technologies or generate 20.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Minerals Technologies  vs.  BK Technologies

 Performance 
       Timeline  
Minerals Technologies 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in June 2024.
BK Technologies 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, BK Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Minerals Technologies and BK Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Minerals Technologies and BK Technologies

The main advantage of trading using opposite Minerals Technologies and BK Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minerals Technologies position performs unexpectedly, BK 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 BK Technologies will offset losses from the drop in BK Technologies' long position.
The idea behind Minerals Technologies and BK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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