Correlation Between Banco Do and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Banco Do and Braskem 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 Banco Do and Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco do Estado and Braskem SA, you can compare the effects of market volatilities on Banco Do and Braskem 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 Banco Do with a short position of Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Braskem SA.
Diversification Opportunities for Banco Do and Braskem SA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and Braskem is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA and Banco Do 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 Banco do Estado are associated (or correlated) with Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA has no effect on the direction of Banco Do i.e., Banco Do and Braskem SA go up and down completely randomly.
Pair Corralation between Banco Do and Braskem SA
Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.63 times more return on investment than Braskem SA. However, Banco do Estado is 1.58 times less risky than Braskem SA. It trades about 0.04 of its potential returns per unit of risk. Braskem SA is currently generating about -0.09 per unit of risk. If you would invest 1,142 in Banco do Estado on August 30, 2024 and sell it today you would earn a total of 62.00 from holding Banco do Estado or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Braskem SA
Performance |
| Timeline |
| Banco do Estado |
| Braskem SA |
Banco Do and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Braskem SA
The main advantage of trading using opposite Banco Do and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Braskem 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 Braskem SA will offset losses from the drop in Braskem SA's long position.| Banco Do vs. Banco do Estado | Banco Do vs. Banestes SA | Banco Do vs. Banco do Estado | Banco Do vs. Banco Santander SA |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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