Correlation Between Braskem SA and Southern Copper

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

Diversification Opportunities for Braskem SA and Southern Copper

0.72

Correlation Coefficient

Braskem SA  Southern Copper

Poor diversification

The 3 months correlation between Braskem and Southern is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Braskem SA i.e., Braskem SA and Southern Copper go up and down completely randomly.

Pair Corralation between Braskem SA and Southern Copper

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Southern Copper. In addition to that, Braskem SA is 1.79 times more volatile than Southern Copper. It trades about -0.27 of its total potential returns per unit of risk. Southern Copper is currently generating about -0.18 per unit of volatility. If you would invest  10,183  in Southern Copper on September 19, 2024 and sell it today you would lose (887.00) from holding Southern Copper or give up 8.71% 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.  Southern Copper

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.

Southern Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Braskem SA and Southern Copper

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

The idea behind Braskem SA Class and Southern Copper 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.