Correlation Between Gerdau SA and Companhia Tecidos

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

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

Diversification Opportunities for Gerdau SA and Companhia Tecidos

-0.74

Correlation Coefficient

Gerdau SA  Companhia Tecidos

Pay attention - limited upside

The 3 months correlation between Gerdau and Companhia is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos 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 Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Gerdau SA i.e., Gerdau SA and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Gerdau SA and Companhia Tecidos

Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.44 times more return on investment than Companhia Tecidos. However, Gerdau SA is 2.29 times less risky than Companhia Tecidos. It trades about 0.05 of its potential returns per unit of risk. Companhia Tecidos Santanense is currently generating about -0.05 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.  Companhia Tecidos Santanense

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.

Companhia Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Tecidos Santanense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gerdau SA and Companhia Tecidos

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

The idea behind Gerdau SA and Companhia Tecidos Santanense 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.