Correlation Between Braskem SA and BASF SE

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

Diversification Opportunities for Braskem SA and BASF SE

-0.31

Correlation Coefficient

Braskem SA  BASF SE

Very good diversification

The 3 months correlation between Braskem and BASF is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE NA has no effect on the direction of Braskem SA i.e., Braskem SA and BASF SE go up and down completely randomly.

Pair Corralation between Braskem SA and BASF SE

Considering the 90-day investment horizon Braskem SA is expected to generate 2.59 times less return on investment than BASF SE. In addition to that, Braskem SA is 1.19 times more volatile than BASF SE NA. It trades about 0.03 of its total potential returns per unit of risk. BASF SE NA is currently generating about 0.11 per unit of volatility. If you would invest  4,440  in BASF SE NA on December 29, 2024 and sell it today you would earn a total of  906.00  from holding BASF SE NA or generate 20.41% return on investment over 90 days.

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

Braskem SA Class  vs.  BASF SE NA

Braskem SA Class

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Braskem SA Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Braskem SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BASF SE NA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE NA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braskem SA and BASF SE

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

The idea behind Braskem SA Class and BASF SE NA 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 .