Correlation Between Metalurgica Gerdau and Warner Music

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

Diversification Opportunities for Metalurgica Gerdau and Warner Music

0.04

Correlation Coefficient

Metalurgica Gerdau  Warner Music

Significant diversification

The 3 months correlation between Metalurgica and Warner is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Warner Music go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Warner Music

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the Warner Music. In addition to that, Metalurgica Gerdau is 1.18 times more volatile than Warner Music Group. It trades about -0.1 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.17 per unit of volatility. If you would invest  4,602  in Warner Music Group on December 2, 2024 and sell it today you would earn a total of  290.00  from holding Warner Music Group or generate 6.3% 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.  Warner Music Group

Metalurgica Gerdau

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Warner Music Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Warner Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalurgica Gerdau and Warner Music

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

The idea behind Metalurgica Gerdau SA and Warner Music Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.