Correlation Between Companhia and Braskem SA

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

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

Diversification Opportunities for Companhia and Braskem SA

-0.68

Correlation Coefficient

Companhia  Braskem SA

Excellent diversification

The 3 months correlation between Companhia and Braskem is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA and Companhia 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 Companhia de Gs are associated (or correlated) with Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA has no effect on the direction of Companhia i.e., Companhia and Braskem SA go up and down completely randomly.

Pair Corralation between Companhia and Braskem SA

Assuming the 90 days trading horizon Companhia de Gs is expected to generate 0.56 times more return on investment than Braskem SA. However, Companhia de Gs is 1.77 times less risky than Braskem SA. It trades about -0.07 of its potential returns per unit of risk. Braskem SA is currently generating about -0.14 per unit of risk. If you would invest  13,700  in Companhia de Gs on September 13, 2024 and sell it today you would lose (300.00) from holding Companhia de Gs or give up 2.19% of portfolio value over 90 days.

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

Companhia de Gs  vs.  Braskem SA

Companhia de Gs

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Gs are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Companhia and Braskem SA

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

The idea behind Companhia de Gs and Braskem SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.