Correlation Between Metalurgica Gerdau and Telecomunicaes Brasileiras
Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA, you can compare the effects of market volatilities on Metalurgica Gerdau and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Telecomunicaes Brasileiras.
Diversification Opportunities for Metalurgica Gerdau and Telecomunicaes Brasileiras
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Metalurgica and Telecomunicaes is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Telecomunicaes Brasileiras SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecomunicaes Brasileiras has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Telecomunicaes Brasileiras go up and down completely randomly.
Pair Corralation between Metalurgica Gerdau and Telecomunicaes Brasileiras
Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.84 times more return on investment than Telecomunicaes Brasileiras. However, Metalurgica Gerdau SA is 1.19 times less risky than Telecomunicaes Brasileiras. It trades about 0.1 of its potential returns per unit of risk. Telecomunicaes Brasileiras SA is currently generating about -0.12 per unit of risk. If you would invest 1,036 in Metalurgica Gerdau SA on September 6, 2024 and sell it today you would earn a total of 119.00 from holding Metalurgica Gerdau SA or generate 11.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Metalurgica Gerdau SA vs. Telecomunicaes Brasileiras SA
Performance |
Timeline |
Metalurgica Gerdau |
Telecomunicaes Brasileiras |
Metalurgica Gerdau and Telecomunicaes Brasileiras Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metalurgica Gerdau and Telecomunicaes Brasileiras
The main advantage of trading using opposite Metalurgica Gerdau and Telecomunicaes Brasileiras positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras will offset losses from the drop in Telecomunicaes Brasileiras' long position.Metalurgica Gerdau vs. Companhia Siderrgica Nacional | Metalurgica Gerdau vs. Banco Bradesco SA | Metalurgica Gerdau vs. Vale SA | Metalurgica Gerdau vs. Petrleo Brasileiro SA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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