Correlation Between KLA Tencor and Braskem SA

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

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

Diversification Opportunities for KLA Tencor and Braskem SA

0.87

Correlation Coefficient

KLA Tencor  Braskem SA

Very poor diversification

The 3 months correlation between KLA and Braskem is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Braskem SA Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA Class and KLA Tencor 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 KLA Tencor are associated (or correlated) with Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA Class has no effect on the direction of KLA Tencor i.e., KLA Tencor and Braskem SA go up and down completely randomly.

Pair Corralation between KLA Tencor and Braskem SA

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.76 times more return on investment than Braskem SA. However, KLA Tencor is 1.32 times less risky than Braskem SA. It trades about -0.05 of its potential returns per unit of risk. Braskem SA Class is currently generating about -0.11 per unit of risk. If you would invest  66,419  in KLA Tencor on September 12, 2024 and sell it today you would lose (1,535) from holding KLA Tencor or give up 2.31% of portfolio value over 90 days.

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

KLA Tencor  vs.  Braskem SA Class

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

Pair Trading with KLA Tencor and Braskem SA

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

The idea behind KLA Tencor and Braskem SA Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.