Correlation Between Sumitomo Chemical and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical 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 Sumitomo Chemical and Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical Co and Braskem SA Class, you can compare the effects of market volatilities on Sumitomo Chemical 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 Sumitomo Chemical with a short position of Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Braskem SA.
Diversification Opportunities for Sumitomo Chemical and Braskem SA
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Braskem is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Braskem SA Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA Class and Sumitomo Chemical 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 Sumitomo Chemical Co 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 Class has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Braskem SA go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Braskem SA
Assuming the 90 days horizon Sumitomo Chemical Co is expected to under-perform the Braskem SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical Co is 2.34 times less risky than Braskem SA. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Braskem SA Class is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 400.00 in Braskem SA Class on November 3, 2024 and sell it today you would earn a total of 64.00 from holding Braskem SA Class or generate 16.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Braskem SA Class
Performance |
| Timeline |
| Sumitomo Chemical |
| Braskem SA Class |
Sumitomo Chemical and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Braskem SA
The main advantage of trading using opposite Sumitomo Chemical and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical 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.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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