Correlation Between Metalurgica Gerdau and I1VZ34

Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and I1VZ34 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 I1VZ34 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 I1VZ34, you can compare the effects of market volatilities on Metalurgica Gerdau and I1VZ34 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 I1VZ34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and I1VZ34.

Diversification Opportunities for Metalurgica Gerdau and I1VZ34

0.59

Correlation Coefficient

Metalurgica Gerdau  I1VZ34

Very weak diversification

The 3 months correlation between Metalurgica and I1VZ34 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and I1VZ34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I1VZ34 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 I1VZ34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I1VZ34 has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and I1VZ34 go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and I1VZ34

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 100.29 times less return on investment than I1VZ34. But when comparing it to its historical volatility, Metalurgica Gerdau SA is 1.06 times less risky than I1VZ34. It trades about 0.0 of its potential returns per unit of risk. I1VZ34 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,871  in I1VZ34 on September 29, 2024 and sell it today you would earn a total of  2,327  from holding I1VZ34 or generate 26.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  I1VZ34

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.

I1VZ34

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in I1VZ34 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I1VZ34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and I1VZ34

The main advantage of trading using opposite Metalurgica Gerdau and I1VZ34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, I1VZ34 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 I1VZ34 will offset losses from the drop in I1VZ34's long position.

The idea behind Metalurgica Gerdau SA and I1VZ34 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.