Correlation Between KLA and Metalurgica Gerdau

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

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

Diversification Opportunities for KLA and Metalurgica Gerdau

-0.13

Correlation Coefficient

KLA  Metalurgica Gerdau

Good diversification

The 3 months correlation between KLA and Metalurgica is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and KLA 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 KLA Corporation are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of KLA i.e., KLA and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between KLA and Metalurgica Gerdau

Assuming the 90 days trading horizon KLA Corporation is expected to generate 1.62 times more return on investment than Metalurgica Gerdau. However, KLA is 1.62 times more volatile than Metalurgica Gerdau SA. It trades about 0.08 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.01 per unit of risk. If you would invest  68,419  in KLA Corporation on October 10, 2024 and sell it today you would earn a total of  36,048  from holding KLA Corporation or generate 52.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

KLA Corp.  vs.  Metalurgica Gerdau SA

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, KLA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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.

Pair Trading with KLA and Metalurgica Gerdau

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

The idea behind KLA Corporation and Metalurgica 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.