Correlation Between Braskem SA and Companhia Energtica

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

By analyzing existing cross correlation between Braskem SA and Companhia Energtica de, you can compare the effects of market volatilities on Braskem SA and Companhia Energtica 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 Companhia Energtica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Companhia Energtica.

Diversification Opportunities for Braskem SA and Companhia Energtica

-0.61

Correlation Coefficient

Braskem SA  Companhia Energtica

Excellent diversification

The 3 months correlation between Braskem and Companhia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica 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 are associated (or correlated) with Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of Braskem SA i.e., Braskem SA and Companhia Energtica go up and down completely randomly.

Pair Corralation between Braskem SA and Companhia Energtica

Assuming the 90 days trading horizon Braskem SA is expected to under-perform the Companhia Energtica. In addition to that, Braskem SA is 1.32 times more volatile than Companhia Energtica de. It trades about -0.04 of its total potential returns per unit of risk. Companhia Energtica de is currently generating about 0.03 per unit of volatility. If you would invest  1,277  in Companhia Energtica de on September 12, 2024 and sell it today you would earn a total of  231.00  from holding Companhia Energtica de or generate 18.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

Braskem SA  vs.  Companhia Energtica de

Braskem SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braskem SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Companhia Energtica

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Energtica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Braskem SA and Companhia Energtica

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

The idea behind Braskem SA and Companhia Energtica de 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .