Correlation Between POSCO Holdings and Braskem SA

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

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

Diversification Opportunities for POSCO Holdings and Braskem SA

-0.51

Correlation Coefficient

POSCO Holdings  Braskem SA

Excellent diversification

The 3 months correlation between POSCO and Braskem is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings i.e., POSCO Holdings and Braskem SA go up and down completely randomly.

Pair Corralation between POSCO Holdings and Braskem SA

Considering the 90-day investment horizon POSCO Holdings is expected to generate 0.69 times more return on investment than Braskem SA. However, POSCO Holdings is 1.46 times less risky than Braskem SA. It trades about 0.11 of its potential returns per unit of risk. Braskem SA Class is currently generating about 0.05 per unit of risk. If you would invest  4,330  in POSCO Holdings on December 28, 2024 and sell it today you would earn a total of  742.00  from holding POSCO Holdings or generate 17.14% return on investment over 90 days.

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

POSCO Holdings  vs.  Braskem SA Class

POSCO Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, POSCO Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Braskem SA Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Braskem SA Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Braskem SA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSCO Holdings and Braskem SA

The main advantage of trading using opposite POSCO Holdings and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings 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 POSCO Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.