Correlation Between Gerdau SA and Friedman Industries
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Friedman Industries 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 Friedman Industries 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 Friedman Industries, you can compare the effects of market volatilities on Gerdau SA and Friedman Industries 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 Friedman Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Friedman Industries.
Diversification Opportunities for Gerdau SA and Friedman Industries
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gerdau and Friedman is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Friedman Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Friedman Industries 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 Friedman Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Friedman Industries has no effect on the direction of Gerdau SA i.e., Gerdau SA and Friedman Industries go up and down completely randomly.
Pair Corralation between Gerdau SA and Friedman Industries
Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Friedman Industries. But the stock apears to be less risky and, when comparing its historical volatility, Gerdau SA ADR is 1.72 times less risky than Friedman Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Friedman Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 988.00 in Friedman Industries on August 31, 2024 and sell it today you would earn a total of 535.00 from holding Friedman Industries or generate 54.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gerdau SA ADR vs. Friedman Industries
Performance |
| Timeline |
| Gerdau SA ADR |
| Friedman Industries |
Gerdau SA and Friedman Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Friedman Industries
The main advantage of trading using opposite Gerdau SA and Friedman Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Friedman Industries 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 Friedman Industries will offset losses from the drop in Friedman Industries' 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 |
| Friedman Industries vs. ArcelorMittal SA | Friedman Industries vs. Aperam PK | Friedman Industries vs. Acerinox SA ADR | Friedman Industries vs. Algoma Steel Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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