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, 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

-0.11

Correlation Coefficient

Grupo Simec  Gerdau SA

Good diversification

The 3 months correlation between Grupo and Gerdau is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA 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 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

Assuming the 90 days trading horizon Grupo Simec SAB is expected to under-perform the Gerdau SA. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Simec SAB is 9.84 times less risky than Gerdau SA. The stock trades about -0.04 of its potential returns per unit of risk. The Gerdau SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,877  in Gerdau SA on September 26, 2024 and sell it today you would earn a total of  924.00  from holding Gerdau SA or generate 15.72% return on investment over 90 days.

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

Grupo Simec SAB  vs.  Gerdau SA

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. Despite somewhat strong primary indicators, Grupo Simec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.