Correlation Between Fertilizantes Heringer and Gerdau SA

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

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

Diversification Opportunities for Fertilizantes Heringer and Gerdau SA

0.44

Correlation Coefficient

Fertilizantes Heringer  Gerdau SA

Very weak diversification

The 3 months correlation between Fertilizantes and Gerdau is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fertilizantes Heringer SA and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and Fertilizantes Heringer 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 Fertilizantes Heringer SA 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 Fertilizantes Heringer i.e., Fertilizantes Heringer and Gerdau SA go up and down completely randomly.

Pair Corralation between Fertilizantes Heringer and Gerdau SA

Assuming the 90 days trading horizon Fertilizantes Heringer SA is expected to generate 12.94 times more return on investment than Gerdau SA. However, Fertilizantes Heringer is 12.94 times more volatile than Gerdau SA. It trades about 0.21 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.29 per unit of risk. If you would invest  354.00  in Fertilizantes Heringer SA on September 27, 2024 and sell it today you would earn a total of  307.00  from holding Fertilizantes Heringer SA or generate 86.72% return on investment over 90 days.

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

Fertilizantes Heringer SA  vs.  Gerdau SA

Fertilizantes Heringer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizantes Heringer SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fertilizantes Heringer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gerdau SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gerdau SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fertilizantes Heringer and Gerdau SA

The main advantage of trading using opposite Fertilizantes Heringer and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fertilizantes Heringer 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 Fertilizantes Heringer SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.