Correlation Between Braskem SA and DL Industries

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Can any of the company-specific risk be diversified away by investing in both Braskem SA and DL Industries 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 DL Industries 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 DL Industries ADR, you can compare the effects of market volatilities on Braskem SA and DL Industries 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 DL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and DL Industries.

Diversification Opportunities for Braskem SA and DL Industries

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Braskem and DLNDY is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR 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 DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Braskem SA i.e., Braskem SA and DL Industries go up and down completely randomly.

Pair Corralation between Braskem SA and DL Industries

Considering the 90-day investment horizon Braskem SA Class is expected to generate 1.29 times more return on investment than DL Industries. However, Braskem SA is 1.29 times more volatile than DL Industries ADR. It trades about 0.01 of its potential returns per unit of risk. DL Industries ADR is currently generating about 0.0 per unit of risk. If you would invest  1,315  in Braskem SA Class on December 29, 2023 and sell it today you would lose (225.00) from holding Braskem SA Class or give up 17.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.77%
ValuesDaily Returns

Braskem SA Class  vs.  DL Industries ADR

 Performance 
       Timeline  
Braskem SA Class 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Braskem SA Class are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Braskem SA disclosed solid returns over the last few months and may actually be approaching a breakup point.
DL Industries ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Braskem SA and DL Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Braskem SA and DL Industries

The main advantage of trading using opposite Braskem SA and DL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, DL Industries 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 DL Industries will offset losses from the drop in DL Industries' long position.
The idea behind Braskem SA Class and DL Industries ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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