Correlation Between Barloworld and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both Barloworld 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 Barloworld and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barloworld Ltd ADR and Gerdau SA ADR, you can compare the effects of market volatilities on Barloworld 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 Barloworld with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Gerdau SA.
Diversification Opportunities for Barloworld and Gerdau SA
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Barloworld and Gerdau is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR 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 Barloworld 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 Barloworld Ltd ADR 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 Barloworld i.e., Barloworld and Gerdau SA go up and down completely randomly.
Pair Corralation between Barloworld and Gerdau SA
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 2.76 times more return on investment than Gerdau SA. However, Barloworld is 2.76 times more volatile than Gerdau SA ADR. It trades about 0.02 of its potential returns per unit of risk. Gerdau SA ADR is currently generating about -0.01 per unit of risk. If you would invest 510.00 in Barloworld Ltd ADR on August 27, 2024 and sell it today you would lose (87.00) from holding Barloworld Ltd ADR or give up 17.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 69.01% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Gerdau SA ADR
Performance |
| Timeline |
| Barloworld ADR |
| Gerdau SA ADR |
Barloworld and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Gerdau SA
The main advantage of trading using opposite Barloworld and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld 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.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Gerdau SA vs. Usinas Siderurgicas de | Gerdau SA vs. Ternium SA ADR | Gerdau SA vs. ArcelorMittal SA ADR | Gerdau SA vs. POSCO Holdings |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |