Correlation Between Gerdau SA and Grupo Sports

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

Diversification Opportunities for Gerdau SA and Grupo Sports

0.02

Correlation Coefficient

Gerdau SA  Grupo Sports

Significant diversification

The 3 months correlation between Gerdau and Grupo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Grupo Sports World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Sports World 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 Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Sports World has no effect on the direction of Gerdau SA i.e., Gerdau SA and Grupo Sports go up and down completely randomly.

Pair Corralation between Gerdau SA and Grupo Sports

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the Grupo Sports. In addition to that, Gerdau SA is 2.16 times more volatile than Grupo Sports World. It trades about -0.19 of its total potential returns per unit of risk. Grupo Sports World is currently generating about -0.12 per unit of volatility. If you would invest  647.00  in Grupo Sports World on October 12, 2024 and sell it today you would lose (32.00) from holding Grupo Sports World or give up 4.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Gerdau SA  vs.  Grupo Sports World

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 weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Grupo Sports World

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Sports World are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Sports may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gerdau SA and Grupo Sports

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

The idea behind Gerdau SA and Grupo Sports World 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.