Correlation Between Gerdau SA and Ferrexpo PLC

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

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

Diversification Opportunities for Gerdau SA and Ferrexpo PLC

0.82

Correlation Coefficient

Gerdau SA  Ferrexpo PLC

Very poor diversification

The 3 months correlation between Gerdau and Ferrexpo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC 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 Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Gerdau SA i.e., Gerdau SA and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between Gerdau SA and Ferrexpo PLC

Assuming the 90 days trading horizon Gerdau SA is expected to generate 1.74 times less return on investment than Ferrexpo PLC. But when comparing it to its historical volatility, Gerdau SA is 2.15 times less risky than Ferrexpo PLC. It trades about 0.01 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Ferrexpo PLC on September 30, 2024 and sell it today you would lose (72.00) from holding Ferrexpo PLC or give up 36.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Gerdau SA  vs.  Ferrexpo PLC

Gerdau SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Ferrexpo PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Ferrexpo PLC

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

The idea behind Gerdau SA and Ferrexpo PLC 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 CEOs Directory module to screen CEOs from public companies around the world.