Correlation Between Braskem SA and Tronox Holdings

Can any of the company-specific risk be diversified away by investing in both Braskem SA and Tronox Holdings 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 Tronox Holdings 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 Tronox Holdings PLC, you can compare the effects of market volatilities on Braskem SA and Tronox Holdings 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 Tronox Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Tronox Holdings.

Diversification Opportunities for Braskem SA and Tronox Holdings

-0.12

Correlation Coefficient

Braskem SA  Tronox Holdings

Good diversification

The 3 months correlation between Braskem and Tronox is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Braskem SA Class and Tronox Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tronox Holdings 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 Class are associated (or correlated) with Tronox Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tronox Holdings PLC has no effect on the direction of Braskem SA i.e., Braskem SA and Tronox Holdings go up and down completely randomly.

Pair Corralation between Braskem SA and Tronox Holdings

Considering the 90-day investment horizon Braskem SA Class is expected to under-perform the Tronox Holdings. In addition to that, Braskem SA is 1.4 times more volatile than Tronox Holdings PLC. It trades about -0.1 of its total potential returns per unit of risk. Tronox Holdings PLC is currently generating about 0.22 per unit of volatility. If you would invest  1,703  in Tronox Holdings PLC on February 22, 2024 and sell it today you would earn a total of  245.00  from holding Tronox Holdings PLC or generate 14.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Braskem SA Class  vs.  Tronox Holdings PLC

Braskem SA Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braskem SA Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Braskem SA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Tronox Holdings PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tronox Holdings PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Tronox Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braskem SA and Tronox Holdings

The main advantage of trading using opposite Braskem SA and Tronox Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem SA position performs unexpectedly, Tronox Holdings 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 Tronox Holdings will offset losses from the drop in Tronox Holdings' long position.

The idea behind Braskem SA Class and Tronox Holdings PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.