Correlation Between Braskem SA and Citizens

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

Diversification Opportunities for Braskem SA and Citizens

-0.47

Correlation Coefficient

Braskem SA  Citizens

Very good diversification

The 3 months correlation between Braskem and Citizens is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of Braskem SA i.e., Braskem SA and Citizens go up and down completely randomly.

Pair Corralation between Braskem SA and Citizens

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Citizens. But the stock apears to be less risky and, when comparing its historical volatility, Braskem SA Class is 1.8 times less risky than Citizens. The stock trades about -0.14 of its potential returns per unit of risk. The Citizens is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Citizens on September 1, 2024 and sell it today you would earn a total of  144.00  from holding Citizens or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Braskem SA Class  vs.  Citizens

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 inconsistent 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.

Citizens

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward indicators, Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braskem SA and Citizens

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

The idea behind Braskem SA Class and Citizens 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.