Correlation Between Metalurgica Gerdau and Apartment Investment

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

Diversification Opportunities for Metalurgica Gerdau and Apartment Investment

0.5

Correlation Coefficient

Metalurgica Gerdau  Apartment Investment

Very weak diversification

The 3 months correlation between Metalurgica and Apartment is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and 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 Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Apartment Investment go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Apartment Investment

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Apartment Investment. But the preferred stock apears to be less risky and, when comparing its historical volatility, Metalurgica Gerdau SA is 1.31 times less risky than Apartment Investment. The preferred stock trades about -0.54 of its potential returns per unit of risk. The Apartment Investment and is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,295  in Apartment Investment and on October 11, 2024 and sell it today you would lose (45.00) from holding Apartment Investment and or give up 0.85% of portfolio value over 90 days.

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

Metalurgica Gerdau SA  vs.  Apartment Investment and

Metalurgica Gerdau

Risk-Adjusted Performance

0 of 100

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

Apartment Investment and

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Apartment Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Metalurgica Gerdau and Apartment Investment

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

The idea behind Metalurgica Gerdau SA and Apartment Investment and 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.