Correlation Between Gerdau SA and CleanGo Innovations

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

Diversification Opportunities for Gerdau SA and CleanGo Innovations

-0.3

Correlation Coefficient

Gerdau SA  CleanGo Innovations

Very good diversification

The 3 months correlation between Gerdau and CleanGo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and CleanGo Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanGo Innovations 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 CleanGo Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanGo Innovations has no effect on the direction of Gerdau SA i.e., Gerdau SA and CleanGo Innovations go up and down completely randomly.

Pair Corralation between Gerdau SA and CleanGo Innovations

Considering the 90-day investment horizon Gerdau SA ADR is expected to generate 0.47 times more return on investment than CleanGo Innovations. However, Gerdau SA ADR is 2.11 times less risky than CleanGo Innovations. It trades about -0.44 of its potential returns per unit of risk. CleanGo Innovations is currently generating about -0.22 per unit of risk. If you would invest  350.00  in Gerdau SA ADR on October 12, 2024 and sell it today you would lose (66.00) from holding Gerdau SA ADR or give up 18.86% of portfolio value over 90 days.

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

Gerdau SA ADR  vs.  CleanGo Innovations

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.

CleanGo Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CleanGo Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gerdau SA and CleanGo Innovations

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

The idea behind Gerdau SA ADR and CleanGo Innovations 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.