Correlation Between Marfrig Global and Metalurgica Gerdau

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

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

Diversification Opportunities for Marfrig Global and Metalurgica Gerdau

0.53

Correlation Coefficient

Marfrig Global  Metalurgica Gerdau

Very weak diversification

The 3 months correlation between Marfrig and Metalurgica is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Marfrig Global 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 Marfrig Global Foods 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 Marfrig Global i.e., Marfrig Global and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Marfrig Global and Metalurgica Gerdau

Assuming the 90 days trading horizon Marfrig Global Foods is expected to generate 1.82 times more return on investment than Metalurgica Gerdau. However, Marfrig Global is 1.82 times more volatile than Metalurgica Gerdau SA. It trades about 0.04 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.07 per unit of risk. If you would invest  1,683  in Marfrig Global Foods on December 26, 2024 and sell it today you would earn a total of  74.00  from holding Marfrig Global Foods or generate 4.4% return on investment over 90 days.

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

Marfrig Global Foods  vs.  Metalurgica Gerdau SA

Marfrig Global Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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 Marfrig Global and Metalurgica Gerdau

The main advantage of trading using opposite Marfrig Global and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marfrig Global 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 Marfrig Global Foods 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.