Correlation Between Metalurgica Gerdau and Marathon Petroleum

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

Diversification Opportunities for Metalurgica Gerdau and Marathon Petroleum

0.09

Correlation Coefficient

Metalurgica Gerdau  Marathon Petroleum

Significant diversification

The 3 months correlation between Metalurgica and Marathon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Marathon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum 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 Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Marathon Petroleum

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Marathon Petroleum. In addition to that, Metalurgica Gerdau is 1.26 times more volatile than Marathon Petroleum. It trades about -0.38 of its total potential returns per unit of risk. Marathon Petroleum is currently generating about -0.31 per unit of volatility. If you would invest  91,500  in Marathon Petroleum on October 4, 2024 and sell it today you would lose (7,515) from holding Marathon Petroleum or give up 8.21% of portfolio value over 90 days.

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

Metalurgica Gerdau SA  vs.  Marathon Petroleum

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.

Marathon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Petroleum 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 basic 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 Marathon Petroleum

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

The idea behind Metalurgica Gerdau SA and Marathon Petroleum 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.