Correlation Between Westlake Chemical and Braskem SA

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

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

Diversification Opportunities for Westlake Chemical and Braskem SA

0.97

Correlation Coefficient

Westlake Chemical  Braskem SA

Almost no diversification

The 3 months correlation between Westlake and Braskem is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical i.e., Westlake Chemical and Braskem SA go up and down completely randomly.

Pair Corralation between Westlake Chemical and Braskem SA

Considering the 90-day investment horizon Westlake Chemical is expected to generate 0.28 times more return on investment than Braskem SA. However, Westlake Chemical is 3.58 times less risky than Braskem SA. It trades about -0.43 of its potential returns per unit of risk. Braskem SA Class is currently generating about -0.33 per unit of risk. If you would invest  12,011  in Westlake Chemical on October 13, 2024 and sell it today you would lose (1,007) from holding Westlake Chemical or give up 8.38% of portfolio value over 90 days.

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

Westlake Chemical  vs.  Braskem SA Class

Westlake Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westlake Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Westlake Chemical and Braskem SA

The main advantage of trading using opposite Westlake Chemical and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical 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 Westlake Chemical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.