Correlation Between Nike and Braskem SA

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

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

Diversification Opportunities for Nike and Braskem SA

0.75

Correlation Coefficient

Nike  Braskem SA

Poor diversification

The 3 months correlation between Nike and Braskem is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Braskem SA Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA Class and Nike 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 Nike Inc 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 Class has no effect on the direction of Nike i.e., Nike and Braskem SA go up and down completely randomly.

Pair Corralation between Nike and Braskem SA

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Braskem SA. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.46 times less risky than Braskem SA. The stock trades about -0.07 of its potential returns per unit of risk. The Braskem SA Class is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  745.00  in Braskem SA Class on September 13, 2024 and sell it today you would lose (237.00) from holding Braskem SA Class or give up 31.81% of portfolio value over 90 days.

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

Nike Inc  vs.  Braskem SA Class

Nike Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Nike is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nike and Braskem SA

The main advantage of trading using opposite Nike and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc and Braskem SA Class 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.