Correlation Between Metalurgica Gerdau and New Oriental

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

Diversification Opportunities for Metalurgica Gerdau and New Oriental

-0.14

Correlation Coefficient

Metalurgica Gerdau  New Oriental

Good diversification

The 3 months correlation between Metalurgica and New is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and New Oriental go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and New Oriental

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the New Oriental. But the preferred stock apears to be less risky and, when comparing its historical volatility, Metalurgica Gerdau SA is 1.83 times less risky than New Oriental. The preferred stock trades about -0.54 of its potential returns per unit of risk. The New Oriental Education is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,516  in New Oriental Education on October 6, 2024 and sell it today you would earn a total of  82.00  from holding New Oriental Education or generate 3.26% 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.  New Oriental Education

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.

New Oriental Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Oriental Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Metalurgica Gerdau and New Oriental

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

The idea behind Metalurgica Gerdau SA and New Oriental Education 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.