Correlation Between Metalurgica Gerdau and United States

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

Diversification Opportunities for Metalurgica Gerdau and United States

0.19

Correlation Coefficient

Metalurgica Gerdau  United States

Average diversification

The 3 months correlation between Metalurgica and United is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and United States go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and United States

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.43 times more return on investment than United States. However, Metalurgica Gerdau SA is 2.31 times less risky than United States. It trades about 0.12 of its potential returns per unit of risk. United States Steel is currently generating about 0.03 per unit of risk. If you would invest  1,005  in Metalurgica Gerdau SA on September 3, 2024 and sell it today you would earn a total of  141.00  from holding Metalurgica Gerdau SA or generate 14.03% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  United States Steel

Metalurgica Gerdau

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau unveiled solid returns over the last few months and may actually be approaching a breakup point.

United States Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metalurgica Gerdau and United States

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

The idea behind Metalurgica Gerdau SA and United States Steel 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.