Correlation Between Metalurgica Gerdau and Qualcomm

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

Diversification Opportunities for Metalurgica Gerdau and Qualcomm

-0.2

Correlation Coefficient

Metalurgica Gerdau  Qualcomm

Good diversification

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

Pair Corralation between Metalurgica Gerdau and Qualcomm

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 4.2 times less return on investment than Qualcomm. In addition to that, Metalurgica Gerdau is 1.01 times more volatile than Qualcomm. It trades about 0.01 of its total potential returns per unit of risk. Qualcomm is currently generating about 0.05 per unit of volatility. If you would invest  8,029  in Qualcomm on October 24, 2024 and sell it today you would earn a total of  421.00  from holding Qualcomm or generate 5.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  Qualcomm

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Qualcomm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qualcomm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Metalurgica Gerdau and Qualcomm

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

The idea behind Metalurgica Gerdau SA and Qualcomm 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.