Correlation Between Braskem SA and Dow
Can any of the company-specific risk be diversified away by investing in both Braskem SA and Dow 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 Dow 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 Dow Inc, you can compare the effects of market volatilities on Braskem SA and Dow 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 Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Dow.
Diversification Opportunities for Braskem SA and Dow
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Braskem and Dow is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Braskem SA i.e., Braskem SA and Dow go up and down completely randomly.
Pair Corralation between Braskem SA and Dow
Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Dow. In addition to that, Braskem SA is 1.37 times more volatile than Dow Inc. It trades about -0.49 of its total potential returns per unit of risk. Dow Inc is currently generating about -0.43 per unit of volatility. If you would invest 5,207 in Dow Inc on August 23, 2024 and sell it today you would lose (726.00) from holding Dow Inc or give up 13.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Braskem SA Class vs. Dow Inc
Performance |
| Timeline |
| Braskem SA Class |
| Dow Inc |
Braskem SA and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Braskem SA and Dow
The main advantage of trading using opposite Braskem SA and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, Dow 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 Dow will offset losses from the drop in Dow's long position.| Braskem SA vs. Valhi Inc | Braskem SA vs. Huntsman | Braskem SA vs. Lsb Industries | Braskem SA vs. Westlake Chemical Partners |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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