Correlation Between Gerdau SA and Kaiser Aluminum

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

Diversification Opportunities for Gerdau SA and Kaiser Aluminum

0.71

Correlation Coefficient

Gerdau SA  Kaiser Aluminum

Poor diversification

The 3 months correlation between Gerdau and Kaiser is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Gerdau SA i.e., Gerdau SA and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Gerdau SA and Kaiser Aluminum

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Kaiser Aluminum. In addition to that, Gerdau SA is 1.2 times more volatile than Kaiser Aluminum. It trades about 0.0 of its total potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.03 per unit of volatility. If you would invest  6,863  in Kaiser Aluminum on December 19, 2024 and sell it today you would earn a total of  158.00  from holding Kaiser Aluminum or generate 2.3% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Kaiser Aluminum

Gerdau SA ADR

Risk-Adjusted Performance

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.

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gerdau SA and Kaiser Aluminum

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

The idea behind Gerdau SA ADR and Kaiser Aluminum 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.