Correlation Between Metalurgica Gerdau and Inepar SA

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

Diversification Opportunities for Metalurgica Gerdau and Inepar SA

-0.52

Correlation Coefficient

Metalurgica Gerdau  Inepar SA

Excellent diversification

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

Pair Corralation between Metalurgica Gerdau and Inepar SA

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.81 times more return on investment than Inepar SA. However, Metalurgica Gerdau SA is 1.24 times less risky than Inepar SA. It trades about 0.07 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about -0.22 per unit of risk. If you would invest  1,048  in Metalurgica Gerdau SA on September 16, 2024 and sell it today you would earn a total of  82.00  from holding Metalurgica Gerdau SA or generate 7.82% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  Inepar SA Indstria

Metalurgica Gerdau

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Inepar SA Indstria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inepar SA Indstria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Metalurgica Gerdau and Inepar SA

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

The idea behind Metalurgica Gerdau SA and Inepar SA Indstria 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.