Correlation Between Gerdau SA and Huntington Ingalls

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

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

Diversification Opportunities for Gerdau SA and Huntington Ingalls

-0.59

Correlation Coefficient

Gerdau SA  Huntington Ingalls

Excellent diversification

The 3 months correlation between Gerdau and Huntington is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Huntington Ingalls Industries, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Gerdau SA i.e., Gerdau SA and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Gerdau SA and Huntington Ingalls

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the Huntington Ingalls. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA is 1.77 times less risky than Huntington Ingalls. The stock trades about -0.87 of its potential returns per unit of risk. The Huntington Ingalls Industries, is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,518  in Huntington Ingalls Industries, on October 15, 2024 and sell it today you would lose (6.00) from holding Huntington Ingalls Industries, or give up 0.4% of portfolio value over 90 days.

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

Gerdau SA  vs.  Huntington Ingalls Industries,

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.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat 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.

Pair Trading with Gerdau SA and Huntington Ingalls

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

The idea behind Gerdau SA and Huntington Ingalls Industries, 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.