Correlation Between Braskem SA and Elektro Redes

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

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

Diversification Opportunities for Braskem SA and Elektro Redes

-0.64

Correlation Coefficient

Braskem SA  Elektro Redes

Excellent diversification

The 3 months correlation between Braskem and Elektro is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and Elektro Redes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elektro Redes SA 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 Elektro Redes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elektro Redes SA has no effect on the direction of Braskem SA i.e., Braskem SA and Elektro Redes go up and down completely randomly.

Pair Corralation between Braskem SA and Elektro Redes

Assuming the 90 days trading horizon Braskem SA is expected to under-perform the Elektro Redes. But the preferred stock apears to be less risky and, when comparing its historical volatility, Braskem SA is 1.48 times less risky than Elektro Redes. The preferred stock trades about -0.33 of its potential returns per unit of risk. The Elektro Redes SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,420  in Elektro Redes SA on October 6, 2024 and sell it today you would earn a total of  297.00  from holding Elektro Redes SA or generate 6.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Braskem SA  vs.  Elektro Redes SA

Braskem SA

Risk-Adjusted Performance

0 of 100

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

Elektro Redes SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elektro Redes SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Elektro Redes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Braskem SA and Elektro Redes

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

The idea behind Braskem SA and Elektro Redes SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.