Correlation Between Metalurgica Gerdau and Mid America

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

Diversification Opportunities for Metalurgica Gerdau and Mid America

-0.11

Correlation Coefficient

Metalurgica Gerdau  Mid America

Good diversification

The 3 months correlation between Metalurgica and Mid is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Mid America go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Mid America

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 3.45 times less return on investment than Mid America. But when comparing it to its historical volatility, Metalurgica Gerdau SA is 1.21 times less risky than Mid America. It trades about 0.01 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,790  in Mid America Apartment Communities on September 24, 2024 and sell it today you would earn a total of  2,994  from holding Mid America Apartment Communities or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.65%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Mid America Apartment Communit

Metalurgica Gerdau

Risk-Adjusted Performance

0 of 100

Insignificant

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.

Mid America Apartment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid America Apartment Communities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mid America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metalurgica Gerdau and Mid America

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

The idea behind Metalurgica Gerdau SA and Mid America Apartment Communities 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.