Correlation Between Gerdau SA and Primo Brands

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

Diversification Opportunities for Gerdau SA and Primo Brands

-0.25

Correlation Coefficient

Gerdau SA  Primo Brands

Very good diversification

The 3 months correlation between Gerdau and Primo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Gerdau SA i.e., Gerdau SA and Primo Brands go up and down completely randomly.

Pair Corralation between Gerdau SA and Primo Brands

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Primo Brands. In addition to that, Gerdau SA is 1.27 times more volatile than Primo Brands. It trades about -0.02 of its total potential returns per unit of risk. Primo Brands is currently generating about 0.18 per unit of volatility. If you would invest  1,276  in Primo Brands on October 5, 2024 and sell it today you would earn a total of  1,831  from holding Primo Brands or generate 143.5% 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.  Primo Brands

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.

Primo Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Primo Brands

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

The idea behind Gerdau SA ADR and Primo Brands 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.