Correlation Between Centrais Eltricas and Gerdau SA

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

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

Diversification Opportunities for Centrais Eltricas and Gerdau SA

-0.52

Correlation Coefficient

Centrais Eltricas  Gerdau SA

Excellent diversification

The 3 months correlation between Centrais and Gerdau is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and Centrais Eltricas 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 Centrais Eltricas Brasileiras are associated (or correlated) with Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Centrais Eltricas i.e., Centrais Eltricas and Gerdau SA go up and down completely randomly.

Pair Corralation between Centrais Eltricas and Gerdau SA

Assuming the 90 days trading horizon Centrais Eltricas Brasileiras is expected to generate 0.9 times more return on investment than Gerdau SA. However, Centrais Eltricas Brasileiras is 1.11 times less risky than Gerdau SA. It trades about 0.12 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.18 per unit of risk. If you would invest  3,703  in Centrais Eltricas Brasileiras on November 28, 2024 and sell it today you would earn a total of  473.00  from holding Centrais Eltricas Brasileiras or generate 12.77% return on investment over 90 days.

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

Centrais Eltricas Brasileiras  vs.  Gerdau SA

Centrais Eltricas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Eltricas Brasileiras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Centrais Eltricas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gerdau SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days 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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Centrais Eltricas and Gerdau SA

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

The idea behind Centrais Eltricas Brasileiras and 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.