Correlation Between Metalurgica Gerdau and Eastman Chemical

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

Diversification Opportunities for Metalurgica Gerdau and Eastman Chemical

-0.16

Correlation Coefficient

Metalurgica Gerdau  Eastman Chemical

Good diversification

The 3 months correlation between Metalurgica and Eastman is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Eastman Chemical go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Eastman Chemical

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Eastman Chemical. In addition to that, Metalurgica Gerdau is 1.87 times more volatile than Eastman Chemical. It trades about -0.01 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.05 per unit of volatility. If you would invest  22,021  in Eastman Chemical on October 10, 2024 and sell it today you would earn a total of  5,519  from holding Eastman Chemical or generate 25.06% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  Eastman Chemical

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.

Eastman Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Chemical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Eastman Chemical 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 Eastman Chemical

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

The idea behind Metalurgica Gerdau SA and Eastman Chemical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.