Correlation Between Gerdau SA and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Franco Nevada 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 Franco Nevada 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 Franco Nevada, you can compare the effects of market volatilities on Gerdau SA and Franco Nevada 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 Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Franco Nevada.
Diversification Opportunities for Gerdau SA and Franco Nevada
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gerdau and Franco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada 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 Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Gerdau SA i.e., Gerdau SA and Franco Nevada go up and down completely randomly.
Pair Corralation between Gerdau SA and Franco Nevada
Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Franco Nevada. In addition to that, Gerdau SA is 1.22 times more volatile than Franco Nevada. It trades about -0.01 of its total potential returns per unit of risk. Franco Nevada is currently generating about 0.03 per unit of volatility. If you would invest 11,177 in Franco Nevada on August 27, 2024 and sell it today you would earn a total of 1,192 from holding Franco Nevada or generate 10.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gerdau SA ADR vs. Franco Nevada
Performance |
| Timeline |
| Gerdau SA ADR |
| Franco Nevada |
Gerdau SA and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Franco Nevada
The main advantage of trading using opposite Gerdau SA and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Franco Nevada 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 Franco Nevada will offset losses from the drop in Franco Nevada's long position.The idea behind Gerdau SA ADR and Franco Nevada 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.| Franco Nevada vs. Royal Gold | Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Pan American Silver | Franco Nevada vs. Sandstorm Gold Ltd |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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