Correlation Between Gerdau SA and Femasys

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

Diversification Opportunities for Gerdau SA and Femasys

-0.15

Correlation Coefficient

Gerdau SA  Femasys

Good diversification

The 3 months correlation between Gerdau and Femasys is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Femasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Femasys 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 Femasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Femasys has no effect on the direction of Gerdau SA i.e., Gerdau SA and Femasys go up and down completely randomly.

Pair Corralation between Gerdau SA and Femasys

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Femasys. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 8.58 times less risky than Femasys. The stock trades about -0.02 of its potential returns per unit of risk. The Femasys is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Femasys on October 27, 2024 and sell it today you would lose (3.00) from holding Femasys or give up 2.54% 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.  Femasys

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 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.

Femasys

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gerdau SA and Femasys

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

The idea behind Gerdau SA ADR and Femasys 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.