Correlation Between Braskem SA and AdvanSix

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

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

Diversification Opportunities for Braskem SA and AdvanSix

0.45

Correlation Coefficient

Braskem SA  AdvanSix

Very weak diversification

The 3 months correlation between Braskem and AdvanSix is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and AdvanSix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSix and Braskem SA 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 Braskem SA Class are associated (or correlated) with AdvanSix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSix has no effect on the direction of Braskem SA i.e., Braskem SA and AdvanSix go up and down completely randomly.

Pair Corralation between Braskem SA and AdvanSix

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the AdvanSix. In addition to that, Braskem SA is 1.07 times more volatile than AdvanSix. It trades about -0.26 of its total potential returns per unit of risk. AdvanSix is currently generating about -0.21 per unit of volatility. If you would invest  2,799  in AdvanSix on February 7, 2024 and sell it today you would lose (478.00) from holding AdvanSix or give up 17.08% of portfolio value over 90 days.

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

Braskem SA Class  vs.  AdvanSix

Braskem SA Class

Risk-Adjusted Performance

4 of 100

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.

AdvanSix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, AdvanSix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Braskem SA and AdvanSix

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

The idea behind Braskem SA Class and AdvanSix 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.