Correlation Between Gerdau SA and Usinas Siderrgicas

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

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

Diversification Opportunities for Gerdau SA and Usinas Siderrgicas

0.43

Correlation Coefficient

Gerdau SA  Usinas Siderrgicas

Very weak diversification

The 3 months correlation between Gerdau and Usinas is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Usinas Siderrgicas de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usinas Siderrgicas 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 Usinas Siderrgicas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usinas Siderrgicas has no effect on the direction of Gerdau SA i.e., Gerdau SA and Usinas Siderrgicas go up and down completely randomly.

Pair Corralation between Gerdau SA and Usinas Siderrgicas

Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.77 times more return on investment than Usinas Siderrgicas. However, Gerdau SA is 1.3 times less risky than Usinas Siderrgicas. It trades about 0.19 of its potential returns per unit of risk. Usinas Siderrgicas de is currently generating about 0.04 per unit of risk. If you would invest  1,566  in Gerdau SA on September 3, 2024 and sell it today you would earn a total of  394.00  from holding Gerdau SA or generate 25.16% return on investment over 90 days.

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

Gerdau SA  vs.  Usinas Siderrgicas de

Gerdau SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gerdau SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Usinas Siderrgicas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Usinas Siderrgicas de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Usinas Siderrgicas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gerdau SA and Usinas Siderrgicas

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

The idea behind Gerdau SA and Usinas Siderrgicas de 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.