Correlation Between Gerdau SA and Txtil Renauxview

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

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

Diversification Opportunities for Gerdau SA and Txtil Renauxview

-0.63

Correlation Coefficient

Gerdau SA  Txtil Renauxview

Excellent diversification

The 3 months correlation between Gerdau and Txtil is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Txtil Renauxview SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Txtil Renauxview 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 Txtil Renauxview. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Txtil Renauxview has no effect on the direction of Gerdau SA i.e., Gerdau SA and Txtil Renauxview go up and down completely randomly.

Pair Corralation between Gerdau SA and Txtil Renauxview

Assuming the 90 days trading horizon Gerdau SA is expected to generate 1.16 times more return on investment than Txtil Renauxview. However, Gerdau SA is 1.16 times more volatile than Txtil Renauxview SA. It trades about 0.03 of its potential returns per unit of risk. Txtil Renauxview SA is currently generating about -0.1 per unit of risk. If you would invest  1,661  in Gerdau SA on September 29, 2024 and sell it today you would earn a total of  47.00  from holding Gerdau SA or generate 2.83% return on investment over 90 days.

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

Gerdau SA  vs.  Txtil Renauxview SA

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.

Txtil Renauxview

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Txtil Renauxview SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Gerdau SA and Txtil Renauxview

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

The idea behind Gerdau SA and Txtil Renauxview SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.