Correlation Between Bread Financial and Metalurgica Gerdau

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Metalurgica Gerdau 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 Bread Financial and Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Bread Financial and Metalurgica Gerdau 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 Bread Financial with a short position of Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Metalurgica Gerdau.

Diversification Opportunities for Bread Financial and Metalurgica Gerdau

0.24

Correlation Coefficient

Bread Financial  Metalurgica Gerdau

Modest diversification

The 3 months correlation between Bread and Metalurgica is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Bread Financial i.e., Bread Financial and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Bread Financial and Metalurgica Gerdau

Assuming the 90 days trading horizon Bread Financial Holdings is expected to under-perform the Metalurgica Gerdau. In addition to that, Bread Financial is 1.36 times more volatile than Metalurgica Gerdau SA. It trades about -0.25 of its total potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.1 per unit of volatility. If you would invest  962.00  in Metalurgica Gerdau SA on December 2, 2024 and sell it today you would lose (45.00) from holding Metalurgica Gerdau SA or give up 4.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bread Financial Holdings  vs.  Metalurgica Gerdau SA

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Metalurgica Gerdau

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bread Financial and Metalurgica Gerdau

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

The idea behind Bread Financial Holdings and Metalurgica Gerdau SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.