Correlation Between Braskem SA and Banco BTG

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

By analyzing existing cross correlation between Braskem SA and Banco BTG Pactual, you can compare the effects of market volatilities on Braskem SA and Banco BTG 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 Banco BTG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Banco BTG.

Diversification Opportunities for Braskem SA and Banco BTG

0.26

Correlation Coefficient

Braskem SA  Banco BTG

Modest diversification

The 3 months correlation between Braskem and Banco is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual 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 are associated (or correlated) with Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of Braskem SA i.e., Braskem SA and Banco BTG go up and down completely randomly.

Pair Corralation between Braskem SA and Banco BTG

Assuming the 90 days trading horizon Braskem SA is expected to under-perform the Banco BTG. In addition to that, Braskem SA is 1.46 times more volatile than Banco BTG Pactual. It trades about -0.08 of its total potential returns per unit of risk. Banco BTG Pactual is currently generating about 0.06 per unit of volatility. If you would invest  3,039  in Banco BTG Pactual on November 28, 2024 and sell it today you would earn a total of  204.00  from holding Banco BTG Pactual or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Braskem SA  vs.  Banco BTG Pactual

Braskem SA

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Banco BTG Pactual

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco BTG Pactual are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Banco BTG may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Braskem SA and Banco BTG

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

The idea behind Braskem SA and Banco BTG Pactual 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.