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, 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

0.73

Correlation Coefficient

Gerdau SA  ArcelorMittal

Poor diversification

The 3 months correlation between Gerdau and ArcelorMittal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 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 generate 1.17 times less return on investment than ArcelorMittal. In addition to that, Gerdau SA is 1.08 times more volatile than ArcelorMittal SA. It trades about 0.13 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.16 per unit of volatility. If you would invest  2,150  in ArcelorMittal SA on September 5, 2024 and sell it today you would earn a total of  356.00  from holding ArcelorMittal SA or generate 16.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Gerdau SA  vs.  ArcelorMittal SA

Gerdau SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 10 (%) 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.

ArcelorMittal SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.