Correlation Between Gerdau SA and BlueScope Steel

Can any of the company-specific risk be diversified away by investing in both Gerdau SA and BlueScope Steel 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 BlueScope Steel 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 BlueScope Steel Ltd, you can compare the effects of market volatilities on Gerdau SA and BlueScope Steel 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 BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and BlueScope Steel.

Diversification Opportunities for Gerdau SA and BlueScope Steel

0.0

Correlation Coefficient

Gerdau SA  BlueScope Steel

Pay attention - limited upside

The 3 months correlation between Gerdau and BlueScope is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Gerdau SA i.e., Gerdau SA and BlueScope Steel go up and down completely randomly.

Pair Corralation between Gerdau SA and BlueScope Steel

Considering the 90-day investment horizon Gerdau SA is expected to generate 8.48 times less return on investment than BlueScope Steel. But when comparing it to its historical volatility, Gerdau SA ADR is 1.42 times less risky than BlueScope Steel. It trades about 0.02 of its potential returns per unit of risk. BlueScope Steel Ltd is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,950  in BlueScope Steel Ltd on December 21, 2024 and sell it today you would earn a total of  1,541  from holding BlueScope Steel Ltd or generate 25.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Gerdau SA ADR  vs.  BlueScope Steel Ltd

Gerdau SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BlueScope Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, BlueScope Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and BlueScope Steel

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

The idea behind Gerdau SA ADR and BlueScope Steel Ltd 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.