Correlation Between Metalurgica Gerdau and Patria Investments

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

Diversification Opportunities for Metalurgica Gerdau and Patria Investments

0.68

Correlation Coefficient

Metalurgica Gerdau  Patria Investments

Poor diversification

The 3 months correlation between Metalurgica and Patria is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Patria Investments go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Patria Investments

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Patria Investments. In addition to that, Metalurgica Gerdau is 1.04 times more volatile than Patria Investments Limited. It trades about -0.19 of its total potential returns per unit of risk. Patria Investments Limited is currently generating about 0.1 per unit of volatility. If you would invest  3,386  in Patria Investments Limited on October 7, 2024 and sell it today you would earn a total of  202.00  from holding Patria Investments Limited or generate 5.97% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  Patria Investments Limited

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 latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Patria Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and Patria Investments

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

The idea behind Metalurgica Gerdau SA and Patria Investments Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.