Correlation Between Gerdau SA and FedEx

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

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

Diversification Opportunities for Gerdau SA and FedEx

0.68

Correlation Coefficient

Gerdau SA  FedEx

Poor diversification

The 3 months correlation between Gerdau and FedEx is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Gerdau SA i.e., Gerdau SA and FedEx go up and down completely randomly.

Pair Corralation between Gerdau SA and FedEx

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the FedEx. In addition to that, Gerdau SA is 1.25 times more volatile than FedEx. It trades about -0.01 of its total potential returns per unit of risk. FedEx is currently generating about 0.18 per unit of volatility. If you would invest  142,800  in FedEx on September 29, 2024 and sell it today you would earn a total of  25,512  from holding FedEx or generate 17.87% return on investment over 90 days.

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

Gerdau SA  vs.  FedEx

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.

FedEx

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Gerdau SA and FedEx

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

The idea behind Gerdau SA and FedEx 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.