Correlation Between Metalurgica Gerdau and Citigroup

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

Diversification Opportunities for Metalurgica Gerdau and Citigroup

0.54

Correlation Coefficient

Metalurgica Gerdau  Citigroup

Very weak diversification

The 3 months correlation between Metalurgica and Citigroup is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Citigroup go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Citigroup

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Citigroup. In addition to that, Metalurgica Gerdau is 1.18 times more volatile than Citigroup. It trades about -0.7 of its total potential returns per unit of risk. Citigroup is currently generating about 0.04 per unit of volatility. If you would invest  7,287  in Citigroup on October 8, 2024 and sell it today you would earn a total of  54.00  from holding Citigroup or generate 0.74% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  Citigroup

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 latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and Citigroup

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

The idea behind Metalurgica Gerdau SA and Citigroup 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.