Correlation Between BRF SA and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both BRF SA 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 BRF SA and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRF SA and Gerdau SA, you can compare the effects of market volatilities on BRF SA 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 BRF SA with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Gerdau SA.
Diversification Opportunities for BRF SA and Gerdau SA
Very good diversification
The 3 months correlation between BRF and Gerdau is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and BRF SA 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 BRF SA 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 BRF SA i.e., BRF SA and Gerdau SA go up and down completely randomly.
Pair Corralation between BRF SA and Gerdau SA
Assuming the 90 days trading horizon BRF SA is expected to generate 1.18 times more return on investment than Gerdau SA. However, BRF SA is 1.18 times more volatile than Gerdau SA. It trades about 0.1 of its potential returns per unit of risk. Gerdau SA is currently generating about 0.08 per unit of risk. If you would invest 2,132 in BRF SA on August 27, 2024 and sell it today you would earn a total of 389.00 from holding BRF SA or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA vs. Gerdau SA
Performance |
| Timeline |
| BRF SA |
| Gerdau SA |
BRF SA and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Gerdau SA
The main advantage of trading using opposite BRF SA and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA 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 BRF SA 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.| Gerdau SA vs. Usinas Siderrgicas de | Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Banco Bradesco SA | Gerdau SA vs. Vale SA |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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