Correlation Between Braskem SA and BASF SE
Can any of the company-specific risk be diversified away by investing in both Braskem SA and BASF SE 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 BASF SE 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 BASF SE NA, you can compare the effects of market volatilities on Braskem SA and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and BASF SE.
Diversification Opportunities for Braskem SA and BASF SE
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Braskem and BASF is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and BASF SE NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE NA 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE NA has no effect on the direction of Braskem SA i.e., Braskem SA and BASF SE go up and down completely randomly.
Pair Corralation between Braskem SA and BASF SE
Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the BASF SE. But the stock apears to be less risky and, when comparing its historical volatility, Braskem SA Class is 1.1 times less risky than BASF SE. The stock trades about -0.24 of its potential returns per unit of risk. The BASF SE NA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 4,790 in BASF SE NA on August 24, 2024 and sell it today you would lose (326.00) from holding BASF SE NA or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Braskem SA Class vs. BASF SE NA
Performance |
| Timeline |
| Braskem SA Class |
| BASF SE NA |
Braskem SA and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Braskem SA and BASF SE
The main advantage of trading using opposite Braskem SA and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Braskem SA vs. Valhi Inc | Braskem SA vs. Huntsman | Braskem SA vs. Lsb Industries | Braskem SA vs. Westlake Chemical Partners |
| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. BASF SE ADR | BASF SE vs. Braskem SA Class | BASF SE vs. Celanese |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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