Correlation Between Metalurgica Gerdau and Raytheon Technologies

Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies, you can compare the effects of market volatilities on Metalurgica Gerdau and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Raytheon Technologies.

Diversification Opportunities for Metalurgica Gerdau and Raytheon Technologies

-0.45

Correlation Coefficient

Metalurgica Gerdau  Raytheon Technologies

Very good diversification

The 3 months correlation between Metalurgica and Raytheon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Raytheon Technologies

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Raytheon Technologies. In addition to that, Metalurgica Gerdau is 1.32 times more volatile than Raytheon Technologies. It trades about -0.17 of its total potential returns per unit of risk. Raytheon Technologies is currently generating about 0.1 per unit of volatility. If you would invest  11,949  in Raytheon Technologies on December 1, 2024 and sell it today you would earn a total of  999.00  from holding Raytheon Technologies or generate 8.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Raytheon Technologies

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.

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Metalurgica Gerdau and Raytheon Technologies

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

The idea behind Metalurgica Gerdau SA and Raytheon Technologies 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.