Correlation Between Itasa Investimentos and Gerdau SA

Can any of the company-specific risk be diversified away by investing in both Itasa Investimentos and Gerdau SA 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 Itasa Investimentos and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itasa Investimentos and Gerdau SA, you can compare the effects of market volatilities on Itasa Investimentos and Gerdau SA 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 Itasa Investimentos with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and Gerdau SA.

Diversification Opportunities for Itasa Investimentos and Gerdau SA

-0.57

Correlation Coefficient

Itasa Investimentos  Gerdau SA

Excellent diversification

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

Pair Corralation between Itasa Investimentos and Gerdau SA

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the Gerdau SA. But the preferred stock apears to be less risky and, when comparing its historical volatility, Itasa Investimentos is 1.65 times less risky than Gerdau SA. The preferred stock trades about -0.13 of its potential returns per unit of risk. The Gerdau SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,804  in Gerdau SA on September 1, 2024 and sell it today you would earn a total of  226.00  from holding Gerdau SA or generate 12.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Itasa Investimentos  vs.  Gerdau SA

Itasa Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itasa Investimentos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Gerdau SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gerdau SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itasa Investimentos and Gerdau SA

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

The idea behind Itasa Investimentos and Gerdau SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.