Correlation Between Metalurgica Gerdau and Melco Resorts

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

Diversification Opportunities for Metalurgica Gerdau and Melco Resorts

-0.2

Correlation Coefficient

Metalurgica Gerdau  Melco Resorts

Good diversification

The 3 months correlation between Metalurgica and Melco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Melco Resorts go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Melco Resorts

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.72 times more return on investment than Melco Resorts. However, Metalurgica Gerdau SA is 1.4 times less risky than Melco Resorts. It trades about -0.03 of its potential returns per unit of risk. Melco Resorts Entertainment is currently generating about -0.12 per unit of risk. If you would invest  1,073  in Metalurgica Gerdau SA on October 4, 2024 and sell it today you would lose (48.00) from holding Metalurgica Gerdau SA or give up 4.47% of portfolio value over 90 days.

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

Metalurgica Gerdau SA  vs.  Melco Resorts Entertainment

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.

Melco Resorts Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melco Resorts Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Metalurgica Gerdau and Melco Resorts

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

The idea behind Metalurgica Gerdau SA and Melco Resorts Entertainment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.