Correlation Between Grupo Simec and Gerdau SA

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

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

Diversification Opportunities for Grupo Simec and Gerdau SA

0.09

Correlation Coefficient

Grupo Simec  Gerdau SA

Significant diversification

The 3 months correlation between Grupo and Gerdau is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Gerdau SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA ADR and Grupo Simec 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 Grupo Simec SAB 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 ADR has no effect on the direction of Grupo Simec i.e., Grupo Simec and Gerdau SA go up and down completely randomly.

Pair Corralation between Grupo Simec and Gerdau SA

Considering the 90-day investment horizon Grupo Simec SAB is expected to generate 0.83 times more return on investment than Gerdau SA. However, Grupo Simec SAB is 1.2 times less risky than Gerdau SA. It trades about -0.04 of its potential returns per unit of risk. Gerdau SA ADR is currently generating about -0.44 per unit of risk. If you would invest  2,756  in Grupo Simec SAB on October 12, 2024 and sell it today you would lose (54.00) from holding Grupo Simec SAB or give up 1.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Grupo Simec SAB  vs.  Gerdau SA ADR

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Gerdau SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grupo Simec and Gerdau SA

The main advantage of trading using opposite Grupo Simec and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB and Gerdau 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.