Correlation Between Gerdau SA and Grupo Simec

Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Grupo Simec 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 Grupo Simec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gerdau SA and Grupo Simec SAB, you can compare the effects of market volatilities on Gerdau SA and Grupo Simec 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 Grupo Simec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Grupo Simec.

Diversification Opportunities for Gerdau SA and Grupo Simec

-0.12

Correlation Coefficient

Gerdau SA  Grupo Simec

Good diversification

The 3 months correlation between Gerdau and Grupo is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 are associated (or correlated) with Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Gerdau SA i.e., Gerdau SA and Grupo Simec go up and down completely randomly.

Pair Corralation between Gerdau SA and Grupo Simec

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the Grupo Simec. In addition to that, Gerdau SA is 9.69 times more volatile than Grupo Simec SAB. It trades about -0.22 of its total potential returns per unit of risk. Grupo Simec SAB is currently generating about -0.14 per unit of volatility. If you would invest  18,500  in Grupo Simec SAB on September 27, 2024 and sell it today you would lose (50.00) from holding Grupo Simec SAB or give up 0.27% of portfolio value over 90 days.

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

Gerdau SA  vs.  Grupo Simec SAB

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Grupo Simec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gerdau SA and Grupo Simec

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

The idea behind Gerdau SA and Grupo Simec SAB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.