Correlation Between Gerdau SA and Rayonier Advanced

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

Diversification Opportunities for Gerdau SA and Rayonier Advanced

0.74

Correlation Coefficient

Gerdau SA  Rayonier Advanced

Poor diversification

The 3 months correlation between Gerdau and Rayonier is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Gerdau SA i.e., Gerdau SA and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Gerdau SA and Rayonier Advanced

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Rayonier Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 1.43 times less risky than Rayonier Advanced. The stock trades about -0.1 of its potential returns per unit of risk. The Rayonier Advanced Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  856.00  in Rayonier Advanced Materials on September 30, 2024 and sell it today you would lose (99.00) from holding Rayonier Advanced Materials or give up 11.57% of portfolio value over 90 days.

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

Gerdau SA ADR  vs.  Rayonier Advanced Materials

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

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Gerdau SA and Rayonier Advanced

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

The idea behind Gerdau SA ADR and Rayonier Advanced Materials 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.