Correlation Between Santos Brasil and Metalurgica Gerdau

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

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

Diversification Opportunities for Santos Brasil and Metalurgica Gerdau

-0.75

Correlation Coefficient

Santos Brasil  Metalurgica Gerdau

Pay attention - limited upside

The 3 months correlation between Santos and Metalurgica is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Santos Brasil Participaes and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Santos Brasil 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 Santos Brasil Participaes 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 Santos Brasil i.e., Santos Brasil and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Santos Brasil and Metalurgica Gerdau

Assuming the 90 days trading horizon Santos Brasil Participaes is expected to generate 0.18 times more return on investment than Metalurgica Gerdau. However, Santos Brasil Participaes is 5.68 times less risky than Metalurgica Gerdau. It trades about 0.21 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.18 per unit of risk. If you would invest  1,277  in Santos Brasil Participaes on December 2, 2024 and sell it today you would earn a total of  59.00  from holding Santos Brasil Participaes or generate 4.62% return on investment over 90 days.

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

Santos Brasil Participaes  vs.  Metalurgica Gerdau SA

Santos Brasil Participaes

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Santos Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Santos Brasil and Metalurgica Gerdau

The main advantage of trading using opposite Santos Brasil and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santos Brasil 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 Santos Brasil Participaes 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.