Correlation Between Braskem SA and KeyCorp

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

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

Diversification Opportunities for Braskem SA and KeyCorp

-0.42

Correlation Coefficient

Braskem SA  KeyCorp

Very good diversification

The 3 months correlation between Braskem and KeyCorp is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Braskem SA i.e., Braskem SA and KeyCorp go up and down completely randomly.

Pair Corralation between Braskem SA and KeyCorp

Assuming the 90 days trading horizon Braskem SA is expected to under-perform the KeyCorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Braskem SA is 1.29 times less risky than KeyCorp. The preferred stock trades about -0.12 of its potential returns per unit of risk. The KeyCorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,486  in KeyCorp on September 3, 2024 and sell it today you would earn a total of  2,046  from holding KeyCorp or generate 21.57% return on investment over 90 days.

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

Braskem SA  vs.  KeyCorp

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KeyCorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, KeyCorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braskem SA and KeyCorp

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

The idea behind Braskem SA and KeyCorp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.