Correlation Between Braskem SA and Black Swan

Can any of the company-specific risk be diversified away by investing in both Braskem SA and Black Swan 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 Black Swan 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 Black Swan Graphene, you can compare the effects of market volatilities on Braskem SA and Black Swan 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 Black Swan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Black Swan.

Diversification Opportunities for Braskem SA and Black Swan

0.76

Correlation Coefficient

Braskem SA  Black Swan

Poor diversification

The 3 months correlation between Braskem and Black is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and Black Swan Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Swan Graphene 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 Black Swan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Swan Graphene has no effect on the direction of Braskem SA i.e., Braskem SA and Black Swan go up and down completely randomly.

Pair Corralation between Braskem SA and Black Swan

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Black Swan. But the stock apears to be less risky and, when comparing its historical volatility, Braskem SA Class is 2.18 times less risky than Black Swan. The stock trades about -0.31 of its potential returns per unit of risk. The Black Swan Graphene is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6.74  in Black Swan Graphene on September 24, 2024 and sell it today you would lose (1.00) from holding Black Swan Graphene or give up 14.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Braskem SA Class  vs.  Black Swan Graphene

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Black Swan Graphene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Swan Graphene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Black Swan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Braskem SA and Black Swan

The main advantage of trading using opposite Braskem SA and Black Swan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, Black Swan 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 Black Swan will offset losses from the drop in Black Swan's long position.

The idea behind Braskem SA Class and Black Swan Graphene 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.