Correlation Between G2D Investments and Metalurgica Gerdau

Can any of the company-specific risk be diversified away by investing in both G2D Investments 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 G2D Investments and Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and Metalurgica Gerdau SA, you can compare the effects of market volatilities on G2D Investments 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 G2D Investments with a short position of Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and Metalurgica Gerdau.

Diversification Opportunities for G2D Investments and Metalurgica Gerdau

-0.5

Correlation Coefficient

G2D Investments  Metalurgica Gerdau

Very good diversification

The 3 months correlation between G2D and Metalurgica is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and G2D Investments 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 G2D Investments 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 G2D Investments i.e., G2D Investments and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between G2D Investments and Metalurgica Gerdau

Assuming the 90 days trading horizon G2D Investments is expected to under-perform the Metalurgica Gerdau. In addition to that, G2D Investments is 1.3 times more volatile than Metalurgica Gerdau SA. It trades about -0.12 of its total potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.11 per unit of volatility. If you would invest  1,052  in Metalurgica Gerdau SA on September 12, 2024 and sell it today you would earn a total of  138.00  from holding Metalurgica Gerdau SA or generate 13.12% return on investment over 90 days.

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

G2D Investments  vs.  Metalurgica Gerdau SA

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments 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 fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Metalurgica Gerdau

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with G2D Investments and Metalurgica Gerdau

The main advantage of trading using opposite G2D Investments and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments 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 G2D Investments 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..