Correlation Between Gerdau SA and Ferrexpo PLC
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Ferrexpo PLC 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 Gerdau SA and Ferrexpo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA ADR and Ferrexpo PLC, you can compare the effects of market volatilities on Gerdau SA and Ferrexpo PLC 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 Gerdau SA with a short position of Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Ferrexpo PLC.
Diversification Opportunities for Gerdau SA and Ferrexpo PLC
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gerdau and Ferrexpo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC and Gerdau 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 Gerdau SA ADR are associated (or correlated) with Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Gerdau SA i.e., Gerdau SA and Ferrexpo PLC go up and down completely randomly.
Pair Corralation between Gerdau SA and Ferrexpo PLC
Considering the 90-day investment horizon Gerdau SA ADR is expected to generate 0.48 times more return on investment than Ferrexpo PLC. However, Gerdau SA ADR is 2.07 times less risky than Ferrexpo PLC. It trades about -0.01 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about -0.01 per unit of risk. If you would invest 435.00 in Gerdau SA ADR on August 27, 2024 and sell it today you would lose (92.00) from holding Gerdau SA ADR or give up 21.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gerdau SA ADR vs. Ferrexpo PLC
Performance |
| Timeline |
| Gerdau SA ADR |
| Ferrexpo PLC |
Gerdau SA and Ferrexpo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Ferrexpo PLC
The main advantage of trading using opposite Gerdau SA and Ferrexpo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Ferrexpo PLC 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 Ferrexpo PLC will offset losses from the drop in Ferrexpo PLC's long position.| Gerdau SA vs. Usinas Siderurgicas de | Gerdau SA vs. Ternium SA ADR | Gerdau SA vs. ArcelorMittal SA ADR | Gerdau SA vs. POSCO Holdings |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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