Correlation Between Braskem SA and Eaton Plc
Can any of the company-specific risk be diversified away by investing in both Braskem SA and Eaton Plc 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 Eaton Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Braskem SA and Eaton plc, you can compare the effects of market volatilities on Braskem SA and Eaton Plc 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 Eaton Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Eaton Plc.
Diversification Opportunities for Braskem SA and Eaton Plc
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Braskem and Eaton is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc 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 Eaton Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton plc has no effect on the direction of Braskem SA i.e., Braskem SA and Eaton Plc go up and down completely randomly.
Pair Corralation between Braskem SA and Eaton Plc
Assuming the 90 days trading horizon Braskem SA is expected to under-perform the Eaton Plc. In addition to that, Braskem SA is 1.1 times more volatile than Eaton plc. It trades about -0.41 of its total potential returns per unit of risk. Eaton plc is currently generating about 0.25 per unit of volatility. If you would invest 14,056 in Eaton plc on August 31, 2024 and sell it today you would earn a total of 1,633 from holding Eaton plc or generate 11.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Braskem SA vs. Eaton plc
Performance |
| Timeline |
| Braskem SA |
| Eaton plc |
Braskem SA and Eaton Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Braskem SA and Eaton Plc
The main advantage of trading using opposite Braskem SA and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, Eaton Plc 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 Eaton Plc will offset losses from the drop in Eaton Plc's long position.| Braskem SA vs. Companhia Siderrgica Nacional | Braskem SA vs. Usinas Siderrgicas de | Braskem SA vs. Companhia Energtica de | Braskem SA vs. Cosan SA |
| Eaton Plc vs. Spotify Technology SA | Eaton Plc vs. Raytheon Technologies | Eaton Plc vs. Fidelity National Information | Eaton Plc vs. Paycom Software |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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