Correlation Between Metalurgica Gerdau and Cemepe Investimentos

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

Diversification Opportunities for Metalurgica Gerdau and Cemepe Investimentos

0.46

Correlation Coefficient

Metalurgica Gerdau  Cemepe Investimentos

Very weak diversification

The 3 months correlation between Metalurgica and Cemepe is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Cemepe Investimentos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemepe Investimentos 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 Cemepe Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemepe Investimentos has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Cemepe Investimentos go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Cemepe Investimentos

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.88 times more return on investment than Cemepe Investimentos. However, Metalurgica Gerdau SA is 1.14 times less risky than Cemepe Investimentos. It trades about 0.07 of its potential returns per unit of risk. Cemepe Investimentos SA is currently generating about -0.02 per unit of risk. If you would invest  1,048  in Metalurgica Gerdau SA on September 14, 2024 and sell it today you would earn a total of  82.00  from holding Metalurgica Gerdau SA or generate 7.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Cemepe Investimentos SA

Metalurgica Gerdau

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cemepe Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemepe Investimentos SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cemepe Investimentos is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Metalurgica Gerdau and Cemepe Investimentos

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

The idea behind Metalurgica Gerdau SA and Cemepe Investimentos SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.