Correlation Between Metalurgica Gerdau and Kraft Heinz

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

Diversification Opportunities for Metalurgica Gerdau and Kraft Heinz

-0.52

Correlation Coefficient

Metalurgica Gerdau  Kraft Heinz

Excellent diversification

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

Pair Corralation between Metalurgica Gerdau and Kraft Heinz

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 16.33 times less return on investment than Kraft Heinz. In addition to that, Metalurgica Gerdau is 1.12 times more volatile than The Kraft Heinz. It trades about 0.0 of its total potential returns per unit of risk. The Kraft Heinz is currently generating about 0.04 per unit of volatility. If you would invest  4,435  in The Kraft Heinz on September 29, 2024 and sell it today you would earn a total of  293.00  from holding The Kraft Heinz or generate 6.61% 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.  The Kraft Heinz

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.

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Kraft Heinz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Kraft Heinz is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalurgica Gerdau and Kraft Heinz

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

The idea behind Metalurgica Gerdau SA and The Kraft Heinz 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.