Correlation Between Gerdau SA and BlueScope Steel

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

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

Diversification Opportunities for Gerdau SA and BlueScope Steel

-0.44

Correlation Coefficient

Gerdau SA  BlueScope Steel

Very good diversification

The 3 months correlation between Gerdau and BlueScope is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Gerdau SA i.e., Gerdau SA and BlueScope Steel go up and down completely randomly.

Pair Corralation between Gerdau SA and BlueScope Steel

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the BlueScope Steel. In addition to that, Gerdau SA is 1.36 times more volatile than BlueScope Steel Limited. It trades about -0.1 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.11 per unit of volatility. If you would invest  1,310  in BlueScope Steel Limited on October 6, 2024 and sell it today you would lose (110.00) from holding BlueScope Steel Limited or give up 8.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.68%
Values	Daily Returns

Gerdau SA  vs.  BlueScope Steel Limited

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 comparatively stable basic indicators, Gerdau SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gerdau SA and BlueScope Steel

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

The idea behind Gerdau SA and BlueScope Steel Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.