Correlation Between Metalurgica Gerdau and Marriott International

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

Diversification Opportunities for Metalurgica Gerdau and Marriott International

0.54

Correlation Coefficient

Metalurgica Gerdau  Marriott International

Very weak diversification

The 3 months correlation between Metalurgica and Marriott is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Marriott International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marriott International 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 Marriott International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marriott International has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Marriott International go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Marriott International

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 6.16 times less return on investment than Marriott International. In addition to that, Metalurgica Gerdau is 1.14 times more volatile than Marriott International. It trades about 0.02 of its total potential returns per unit of risk. Marriott International is currently generating about 0.13 per unit of volatility. If you would invest  27,521  in Marriott International on October 9, 2024 and sell it today you would earn a total of  14,107  from holding Marriott International or generate 51.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.35%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Marriott International

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.

Marriott International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marriott International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marriott International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and Marriott International

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

The idea behind Metalurgica Gerdau SA and Marriott International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.