Correlation Between NACCO Industries and Braskem SA

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

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

Diversification Opportunities for NACCO Industries and Braskem SA

0.46

Correlation Coefficient

NACCO Industries  Braskem SA

Very weak diversification

The 3 months correlation between NACCO and Braskem is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding NACCO Industries 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 NACCO Industries 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 NACCO Industries 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 NACCO Industries i.e., NACCO Industries and Braskem SA go up and down completely randomly.

Pair Corralation between NACCO Industries and Braskem SA

Allowing for the 90-day total investment horizon NACCO Industries is expected to generate 0.73 times more return on investment than Braskem SA. However, NACCO Industries is 1.38 times less risky than Braskem SA. It trades about 0.0 of its potential returns per unit of risk. Braskem SA Class is currently generating about -0.01 per unit of risk. If you would invest  3,541  in NACCO Industries on November 19, 2024 and sell it today you would lose (344.00) from holding NACCO Industries or give up 9.71% of portfolio value over 90 days.

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

NACCO Industries  vs.  Braskem SA Class

NACCO Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NACCO Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, NACCO Industries may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Braskem SA Class

Risk-Adjusted Performance

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 quite persistent basic indicators, Braskem SA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NACCO Industries and Braskem SA

The main advantage of trading using opposite NACCO Industries and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NACCO Industries 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 NACCO Industries 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.