Correlation Between Gerdau SA and Sphere Entertainment

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

Diversification Opportunities for Gerdau SA and Sphere Entertainment

0.04

Correlation Coefficient

Gerdau SA  Sphere Entertainment

Significant diversification

The 3 months correlation between Gerdau and Sphere is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Gerdau SA i.e., Gerdau SA and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Gerdau SA and Sphere Entertainment

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Sphere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 1.59 times less risky than Sphere Entertainment. The stock trades about -0.01 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,455  in Sphere Entertainment Co on October 5, 2024 and sell it today you would earn a total of  1,696  from holding Sphere Entertainment Co or generate 69.08% 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.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gerdau SA and Sphere Entertainment

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

The idea behind Gerdau SA ADR and Sphere Entertainment Co 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.