Correlation Between Companhia Siderurgica and Acerinox

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

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

Diversification Opportunities for Companhia Siderurgica and Acerinox

0.46

Correlation Coefficient

Companhia Siderurgica  Acerinox

Very weak diversification

The 3 months correlation between Companhia and Acerinox is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR and Companhia Siderurgica 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 Companhia Siderurgica Nacional are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and Acerinox go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and Acerinox

Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to under-perform the Acerinox. In addition to that, Companhia Siderurgica is 1.44 times more volatile than Acerinox SA ADR. It trades about -0.1 of its total potential returns per unit of risk. Acerinox SA ADR is currently generating about -0.02 per unit of volatility. If you would invest  510.00  in Acerinox SA ADR on September 28, 2024 and sell it today you would lose (39.00) from holding Acerinox SA ADR or give up 7.65% of portfolio value over 90 days.

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

Companhia Siderurgica Nacional  vs.  Acerinox SA ADR

Companhia Siderurgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderurgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Acerinox SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acerinox SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Companhia Siderurgica and Acerinox

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

The idea behind Companhia Siderurgica Nacional and Acerinox SA ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.