Correlation Between Braskem SA and Gerdau SA

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

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

Diversification Opportunities for Braskem SA and Gerdau SA

0.12

Correlation Coefficient

Braskem SA  Gerdau SA

Average diversification

The 3 months correlation between Braskem and Gerdau is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA 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 are associated (or correlated) with Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Braskem SA i.e., Braskem SA and Gerdau SA go up and down completely randomly.

Pair Corralation between Braskem SA and Gerdau SA

Assuming the 90 days trading horizon Braskem SA is expected to generate 1.44 times more return on investment than Gerdau SA. However, Braskem SA is 1.44 times more volatile than Gerdau SA. It trades about -0.17 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.49 per unit of risk. If you would invest  1,925  in Braskem SA on March 16, 2024 and sell it today you would lose (136.00) from holding Braskem SA or give up 7.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Braskem SA  vs.  Gerdau SA

Braskem SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braskem SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gerdau SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Braskem SA and Gerdau SA

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

The idea behind Braskem SA and Gerdau SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.