Correlation Between Gerdau SA and Mowi ASA

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

Diversification Opportunities for Gerdau SA and Mowi ASA

-0.05

Correlation Coefficient

Gerdau SA  Mowi ASA

Good diversification

The 3 months correlation between Gerdau and Mowi is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA 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 Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Gerdau SA i.e., Gerdau SA and Mowi ASA go up and down completely randomly.

Pair Corralation between Gerdau SA and Mowi ASA

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Mowi ASA. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 1.13 times less risky than Mowi ASA. The stock trades about -0.09 of its potential returns per unit of risk. The Mowi ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Mowi ASA on December 14, 2024 and sell it today you would earn a total of  5.00  from holding Mowi ASA or generate 0.27% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Mowi ASA

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 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mowi ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mowi ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mowi ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gerdau SA and Mowi ASA

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

The idea behind Gerdau SA ADR and Mowi ASA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.