Correlation Between Sociedad Quimica and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Sociedad Quimica 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 Sociedad Quimica and Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sociedad Quimica y and Braskem SA Class, you can compare the effects of market volatilities on Sociedad Quimica 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 Sociedad Quimica with a short position of Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sociedad Quimica and Braskem SA.
Diversification Opportunities for Sociedad Quimica and Braskem SA
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sociedad and Braskem is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Quimica y 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 Sociedad Quimica 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 Sociedad Quimica y 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 Sociedad Quimica i.e., Sociedad Quimica and Braskem SA go up and down completely randomly.
Pair Corralation between Sociedad Quimica and Braskem SA
Considering the 90-day investment horizon Sociedad Quimica y is expected to generate 1.41 times more return on investment than Braskem SA. However, Sociedad Quimica is 1.41 times more volatile than Braskem SA Class. It trades about -0.08 of its potential returns per unit of risk. Braskem SA Class is currently generating about -0.37 per unit of risk. If you would invest 4,586 in Sociedad Quimica y on January 26, 2024 and sell it today you would lose (259.00) from holding Sociedad Quimica y or give up 5.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sociedad Quimica y vs. Braskem SA Class
Performance |
| Timeline |
| Sociedad Quimica y |
| Braskem SA Class |
Sociedad Quimica and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sociedad Quimica and Braskem SA
The main advantage of trading using opposite Sociedad Quimica and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sociedad Quimica 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.| Sociedad Quimica vs. Innospec | Sociedad Quimica vs. Minerals Technologies | Sociedad Quimica vs. Oil Dri | Sociedad Quimica vs. Quaker Chemical |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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