Trade action flash – LONG BASF / SHORT AKZO, SHORT BASIC MATERIALS ETF (XLB US)
October 6, 2014
Relative value / MRPT© mean reverting pair trading strategies
BAS GR: Eur70.15; AKZ NA: Eur51.32 ; XLB US: US$48.43
Following the significant underperformance of BASF over the last four months, we recommend to go long BASF and short Akzo Nobel as well as the US basic materials ETF XLB (Materials Select Sector SPDR) with which BASF is most mean reverting. Following a price drop of 20% since June (reduced expectations/exposure to Russia), BASF is significantly undervalued in the global Chemicals sector, although in absolute terms the stock is overvalued (as the rest of the sector) – hence our long/short recommendation with a market neutral exposure, possibly slightly net short.FULL REPORT ATTACHED