Correlation Between Metalurgica Gerdau and Livetech

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

Diversification Opportunities for Metalurgica Gerdau and Livetech

0.81

Correlation Coefficient

Metalurgica Gerdau  Livetech

Very poor diversification

The 3 months correlation between Metalurgica and Livetech is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Livetech da Bahia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livetech da Bahia 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 Livetech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livetech da Bahia has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Livetech go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Livetech

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Livetech. In addition to that, Metalurgica Gerdau is 1.11 times more volatile than Livetech da Bahia. It trades about -0.1 of its total potential returns per unit of risk. Livetech da Bahia is currently generating about -0.01 per unit of volatility. If you would invest  222.00  in Livetech da Bahia on December 2, 2024 and sell it today you would lose (2.00) from holding Livetech da Bahia or give up 0.9% of portfolio value over 90 days.

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

Metalurgica Gerdau SA  vs.  Livetech da Bahia

Metalurgica Gerdau

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Livetech da Bahia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Livetech da Bahia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 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 Livetech

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

The idea behind Metalurgica Gerdau SA and Livetech da Bahia 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.