Correlation Between Vale SA and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Braskem SA, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Braskem SA.
Diversification Opportunities for Vale SA and Braskem SA
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Braskem is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA and Vale 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 Vale SA 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 Vale SA i.e., Vale SA and Braskem SA go up and down completely randomly.
Pair Corralation between Vale SA and Braskem SA
Assuming the 90 days trading horizon Vale SA is expected to generate 0.52 times more return on investment than Braskem SA. However, Vale SA is 1.91 times less risky than Braskem SA. It trades about -0.02 of its potential returns per unit of risk. Braskem SA is currently generating about -0.02 per unit of risk. If you would invest 7,177 in Vale SA on November 28, 2024 and sell it today you would lose (1,470) from holding Vale SA or give up 20.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Braskem SA
Performance |
| Timeline |
| Vale SA |
| Braskem SA |
Vale SA and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Braskem SA
The main advantage of trading using opposite Vale SA and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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.| Vale SA vs. Petrleo Brasileiro SA | Vale SA vs. Banco do Brasil | Vale SA vs. Ita Unibanco Holding | Vale SA vs. Banco Bradesco SA |
| Braskem SA vs. Companhia Siderrgica Nacional | Braskem SA vs. Usinas Siderrgicas de | Braskem SA vs. Gerdau SA | Braskem SA vs. Companhia Energtica de |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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