Correlation Between Palantir Technologies and Metalurgica Gerdau

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

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

Diversification Opportunities for Palantir Technologies and Metalurgica Gerdau

0.3

Correlation Coefficient

Palantir Technologies  Metalurgica Gerdau

Weak diversification

The 3 months correlation between Palantir and Metalurgica is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Palantir Technologies and Metalurgica Gerdau

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 2.16 times more return on investment than Metalurgica Gerdau. However, Palantir Technologies is 2.16 times more volatile than Metalurgica Gerdau SA. It trades about 0.24 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.03 per unit of risk. If you would invest  8,087  in Palantir Technologies on October 20, 2024 and sell it today you would earn a total of  6,508  from holding Palantir Technologies or generate 80.47% return on investment over 90 days.

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

Palantir Technologies  vs.  Metalurgica Gerdau SA

Palantir Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively stable basic indicators, Metalurgica Gerdau is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Palantir Technologies and Metalurgica Gerdau

The main advantage of trading using opposite Palantir Technologies and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .