Correlation Between Braskem SA and BASF SE

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

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

Diversification Opportunities for Braskem SA and BASF SE

0.84

Correlation Coefficient

Braskem SA  BASF SE

Very poor diversification

The 3 months correlation between Braskem and BASF is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA and Braskem SA 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 Braskem SA Class 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 NA has no effect on the direction of Braskem SA i.e., Braskem SA and BASF SE go up and down completely randomly.

Pair Corralation between Braskem SA and BASF SE

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the BASF SE. In addition to that, Braskem SA is 1.05 times more volatile than BASF SE NA. It trades about -0.13 of its total potential returns per unit of risk. BASF SE NA is currently generating about -0.06 per unit of volatility. If you would invest  4,950  in BASF SE NA on August 31, 2024 and sell it today you would lose (595.00) from holding BASF SE NA or give up 12.02% of portfolio value over 90 days.

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

Braskem SA Class  vs.  BASF SE NA

Braskem SA Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braskem SA Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BASF SE NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE NA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Braskem SA and BASF SE

The main advantage of trading using opposite Braskem SA and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA 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 Braskem SA Class and BASF SE NA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.