Correlation Between Gerdau SA and BranchOut Food

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

Diversification Opportunities for Gerdau SA and BranchOut Food

0.11

Correlation Coefficient

Gerdau SA  BranchOut Food

Average diversification

The 3 months correlation between Gerdau and BranchOut is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and BranchOut Food Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BranchOut Food Common 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 BranchOut Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BranchOut Food Common has no effect on the direction of Gerdau SA i.e., Gerdau SA and BranchOut Food go up and down completely randomly.

Pair Corralation between Gerdau SA and BranchOut Food

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the BranchOut Food. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 1.66 times less risky than BranchOut Food. The stock trades about -0.45 of its potential returns per unit of risk. The BranchOut Food Common is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  170.00  in BranchOut Food Common on October 6, 2024 and sell it today you would earn a total of  22.00  from holding BranchOut Food Common or generate 12.94% return on investment over 90 days.

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

Gerdau SA ADR  vs.  BranchOut Food Common

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BranchOut Food Common

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BranchOut Food Common are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BranchOut Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and BranchOut Food

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

The idea behind Gerdau SA ADR and BranchOut Food Common 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.