Correlation Between Gerdau SA and Aperam PK

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

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

Diversification Opportunities for Gerdau SA and Aperam PK

0.73

Correlation Coefficient

Gerdau SA  Aperam PK

Poor diversification

The 3 months correlation between Gerdau and Aperam is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Aperam PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam PK and Gerdau 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 Gerdau SA ADR are associated (or correlated) with Aperam PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam PK has no effect on the direction of Gerdau SA i.e., Gerdau SA and Aperam PK go up and down completely randomly.

Pair Corralation between Gerdau SA and Aperam PK

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Aperam PK. In addition to that, Gerdau SA is 1.02 times more volatile than Aperam PK. It trades about -0.05 of its total potential returns per unit of risk. Aperam PK is currently generating about -0.01 per unit of volatility. If you would invest  2,722  in Aperam PK on October 22, 2024 and sell it today you would lose (99.00) from holding Aperam PK or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Gerdau SA ADR  vs.  Aperam PK

Gerdau SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Aperam PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Aperam PK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gerdau SA and Aperam PK

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

The idea behind Gerdau SA ADR and Aperam PK 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.