Correlation Between Gerdau SA and Maanshan Iron

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

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

Diversification Opportunities for Gerdau SA and Maanshan Iron

-0.19

Correlation Coefficient

Gerdau SA  Maanshan Iron

Good diversification

The 3 months correlation between Gerdau and Maanshan is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Maanshan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maanshan Iron Steel 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 Maanshan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maanshan Iron Steel has no effect on the direction of Gerdau SA i.e., Gerdau SA and Maanshan Iron go up and down completely randomly.

Pair Corralation between Gerdau SA and Maanshan Iron

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the Maanshan Iron. But the preferred stock apears to be less risky and, when comparing its historical volatility, Gerdau SA is 1.54 times less risky than Maanshan Iron. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Maanshan Iron Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Maanshan Iron Steel on December 31, 2024 and sell it today you would earn a total of  4.00  from holding Maanshan Iron Steel or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Gerdau SA  vs.  Maanshan Iron Steel

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 comparatively stable basic indicators, Gerdau SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Maanshan Iron Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maanshan Iron Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Maanshan Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Maanshan Iron

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

The idea behind Gerdau SA and Maanshan Iron Steel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.