Correlation Between Braskem SA and Insteel Industries

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

Diversification Opportunities for Braskem SA and Insteel Industries

0.68

Correlation Coefficient

Braskem SA  Insteel Industries

Poor diversification

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

Pair Corralation between Braskem SA and Insteel Industries

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Insteel Industries. In addition to that, Braskem SA is 1.69 times more volatile than Insteel Industries. It trades about -0.14 of its total potential returns per unit of risk. Insteel Industries is currently generating about -0.04 per unit of volatility. If you would invest  2,976  in Insteel Industries on December 3, 2024 and sell it today you would lose (217.00) from holding Insteel Industries or give up 7.29% of portfolio value over 90 days.

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

Braskem SA Class  vs.  Insteel Industries

Braskem SA Class

Risk-Adjusted Performance

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

Insteel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Braskem SA and Insteel Industries

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

The idea behind Braskem SA Class and Insteel Industries 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.