Correlation Between Metalurgica Gerdau and Alphabet

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

Diversification Opportunities for Metalurgica Gerdau and Alphabet

-0.05

Correlation Coefficient

Metalurgica Gerdau  Alphabet

Good diversification

The 3 months correlation between Metalurgica and Alphabet is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Alphabet go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Alphabet

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Alphabet. In addition to that, Metalurgica Gerdau is 1.32 times more volatile than Alphabet. It trades about -0.22 of its total potential returns per unit of risk. Alphabet is currently generating about -0.04 per unit of volatility. If you would invest  10,026  in Alphabet on October 23, 2024 and sell it today you would lose (112.00) from holding Alphabet or give up 1.12% of portfolio value over 90 days.

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

Metalurgica Gerdau SA  vs.  Alphabet

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.

Alphabet

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alphabet sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and Alphabet

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

The idea behind Metalurgica Gerdau SA and Alphabet 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.