Correlation Between Braskem SA and Companhia Paranaense

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

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

Diversification Opportunities for Braskem SA and Companhia Paranaense

-0.31

Correlation Coefficient

Braskem SA  Companhia Paranaense

Very good diversification

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

Pair Corralation between Braskem SA and Companhia Paranaense

Assuming the 90 days trading horizon Braskem SA is expected to generate 31.58 times less return on investment than Companhia Paranaense. In addition to that, Braskem SA is 2.43 times more volatile than Companhia Paranaense de. It trades about 0.0 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.18 per unit of volatility. If you would invest  915.00  in Companhia Paranaense de on December 30, 2024 and sell it today you would earn a total of  133.00  from holding Companhia Paranaense de or generate 14.54% return on investment over 90 days.

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

Braskem SA  vs.  Companhia Paranaense de

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 comparatively stable basic indicators, Braskem SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Paranaense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braskem SA and Companhia Paranaense

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

The idea behind Braskem SA and Companhia Paranaense de 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.