Correlation Between Metalurgica Gerdau and Air Products

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

Diversification Opportunities for Metalurgica Gerdau and Air Products

0.43

Correlation Coefficient

Metalurgica Gerdau  Air Products

Very weak diversification

The 3 months correlation between Metalurgica and Air is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Air Products go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Air Products

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Air Products. In addition to that, Metalurgica Gerdau is 1.31 times more volatile than Air Products and. It trades about -0.01 of its total potential returns per unit of risk. Air Products and is currently generating about 0.03 per unit of volatility. If you would invest  37,583  in Air Products and on October 11, 2024 and sell it today you would earn a total of  7,267  from holding Air Products and or generate 19.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.79%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Air Products 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.

Air Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Air Products is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalurgica Gerdau and Air Products

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

The idea behind Metalurgica Gerdau SA and Air Products 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.