Correlation Between Gerdau SA and Gfl Environmental

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

Diversification Opportunities for Gerdau SA and Gfl Environmental

0.19

Correlation Coefficient

Gerdau SA  Gfl Environmental

Average diversification

The 3 months correlation between Gerdau and Gfl is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Gfl Environmental Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfl Environmental 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 Gfl Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfl Environmental has no effect on the direction of Gerdau SA i.e., Gerdau SA and Gfl Environmental go up and down completely randomly.

Pair Corralation between Gerdau SA and Gfl Environmental

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Gfl Environmental. In addition to that, Gerdau SA is 1.23 times more volatile than Gfl Environmental Holdings. It trades about -0.01 of its total potential returns per unit of risk. Gfl Environmental Holdings is currently generating about 0.05 per unit of volatility. If you would invest  3,204  in Gfl Environmental Holdings on October 5, 2024 and sell it today you would earn a total of  1,260  from holding Gfl Environmental Holdings or generate 39.33% 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.  Gfl Environmental Holdings

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.

Gfl Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfl Environmental Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gfl Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gerdau SA and Gfl Environmental

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

The idea behind Gerdau SA ADR and Gfl Environmental Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.