Correlation Between Gerdau SA and ArcelorMittal

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

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

Diversification Opportunities for Gerdau SA and ArcelorMittal

-0.06

Correlation Coefficient

Gerdau SA  ArcelorMittal

Good diversification

The 3 months correlation between Gerdau and ArcelorMittal is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Gerdau SA i.e., Gerdau SA and ArcelorMittal go up and down completely randomly.

Pair Corralation between Gerdau SA and ArcelorMittal

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the ArcelorMittal. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA is 1.27 times less risky than ArcelorMittal. The stock trades about -0.19 of its potential returns per unit of risk. The ArcelorMittal SA ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,552  in ArcelorMittal SA ADR on December 2, 2024 and sell it today you would earn a total of  222.00  from holding ArcelorMittal SA ADR or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Gerdau SA  vs.  ArcelorMittal SA ADR

Gerdau SA

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gerdau SA and ArcelorMittal

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

The idea behind Gerdau SA and ArcelorMittal SA ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .