Correlation Between Metalurgica Gerdau and Inepar SA

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

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

Diversification Opportunities for Metalurgica Gerdau and Inepar SA

-0.32

Correlation Coefficient

Metalurgica Gerdau  Inepar SA

Very good diversification

The 3 months correlation between Metalurgica and Inepar is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria and Metalurgica Gerdau 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 Metalurgica Gerdau SA are associated (or correlated) with Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Inepar SA go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Inepar SA

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Inepar SA. But the stock apears to be less risky and, when comparing its historical volatility, Metalurgica Gerdau SA is 2.2 times less risky than Inepar SA. The stock trades about -0.19 of its potential returns per unit of risk. The Inepar SA Indstria is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Inepar SA Indstria on December 5, 2024 and sell it today you would earn a total of  17.00  from holding Inepar SA Indstria or generate 12.88% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  Inepar SA Indstria

Metalurgica Gerdau

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Inepar SA Indstria

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inepar SA Indstria are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inepar SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and Inepar SA

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

The idea behind Metalurgica Gerdau SA and Inepar SA Indstria 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.