Correlation Between Telecomunicaes Brasileiras and Metalurgica Gerdau
Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras and Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telecomunicaes Brasileiras SA and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras with a short position of Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and Metalurgica Gerdau.
Diversification Opportunities for Telecomunicaes Brasileiras and Metalurgica Gerdau
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Telecomunicaes and Metalurgica is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA 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 Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Metalurgica Gerdau go up and down completely randomly.
Pair Corralation between Telecomunicaes Brasileiras and Metalurgica Gerdau
Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the Metalurgica Gerdau. In addition to that, Telecomunicaes Brasileiras is 1.19 times more volatile than Metalurgica Gerdau SA. It trades about -0.12 of its total potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.1 per unit of volatility. If you would invest 1,036 in Metalurgica Gerdau SA on September 6, 2024 and sell it today you would earn a total of 119.00 from holding Metalurgica Gerdau SA or generate 11.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Telecomunicaes Brasileiras SA vs. Metalurgica Gerdau SA
Performance |
Timeline |
Telecomunicaes Brasileiras |
Metalurgica Gerdau |
Telecomunicaes Brasileiras and Metalurgica Gerdau Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Telecomunicaes Brasileiras and Metalurgica Gerdau
The main advantage of trading using opposite Telecomunicaes Brasileiras and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA 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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Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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