Correlation Between Metalurgica Gerdau and United Natural

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

Diversification Opportunities for Metalurgica Gerdau and United Natural

0.57

Correlation Coefficient

Metalurgica Gerdau  United Natural

Very weak diversification

The 3 months correlation between Metalurgica and United is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and United Natural Foods, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods, 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods, has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and United Natural go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and United Natural

Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 106.37 times less return on investment than United Natural. But when comparing it to its historical volatility, Metalurgica Gerdau SA is 2.37 times less risky than United Natural. It trades about 0.0 of its potential returns per unit of risk. United Natural Foods, is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,818  in United Natural Foods, on October 4, 2024 and sell it today you would earn a total of  1,417  from holding United Natural Foods, or generate 50.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	18.84%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  United Natural Foods,

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.

United Natural Foods,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metalurgica Gerdau and United Natural

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

The idea behind Metalurgica Gerdau SA and United Natural Foods, 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.