Correlation Between Metalurgica Gerdau and Cia De

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

Diversification Opportunities for Metalurgica Gerdau and Cia De

-0.52

Correlation Coefficient

Metalurgica Gerdau  Cia De

Excellent diversification

The 3 months correlation between Metalurgica and Cia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Cia de Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cia de Ferro 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 Cia De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cia de Ferro has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Cia De go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Cia De

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 27.71 times less return on investment than Cia De. But when comparing it to its historical volatility, Metalurgica Gerdau SA is 11.76 times less risky than Cia De. It trades about 0.02 of its potential returns per unit of risk. Cia de Ferro is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,490  in Cia de Ferro on September 12, 2024 and sell it today you would lose (314.00) from holding Cia de Ferro or give up 21.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	67.23%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Cia de Ferro

Metalurgica Gerdau

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cia de Ferro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cia de Ferro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the 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.

Pair Trading with Metalurgica Gerdau and Cia De

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

The idea behind Metalurgica Gerdau SA and Cia de Ferro 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.