Correlation Between Gerdau SA and BTG Pactual

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

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

Diversification Opportunities for Gerdau SA and BTG Pactual

-0.6

Correlation Coefficient

Gerdau SA  BTG Pactual

Excellent diversification

The 3 months correlation between Gerdau and BTG is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and BTG Pactual Logstica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Pactual Logstica 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 BTG Pactual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Pactual Logstica has no effect on the direction of Gerdau SA i.e., Gerdau SA and BTG Pactual go up and down completely randomly.

Pair Corralation between Gerdau SA and BTG Pactual

Assuming the 90 days trading horizon Gerdau SA is expected to generate 1.59 times more return on investment than BTG Pactual. However, Gerdau SA is 1.59 times more volatile than BTG Pactual Logstica. It trades about 0.05 of its potential returns per unit of risk. BTG Pactual Logstica is currently generating about -0.03 per unit of risk. If you would invest  1,586  in Gerdau SA on September 27, 2024 and sell it today you would earn a total of  165.00  from holding Gerdau SA or generate 10.4% return on investment over 90 days.

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

Gerdau SA  vs.  BTG Pactual Logstica

Gerdau SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gerdau SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Pactual Logstica has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong essential indicators, BTG Pactual 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 BTG Pactual

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

The idea behind Gerdau SA and BTG Pactual Logstica 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.