Correlation Between Gerdau SA and CARPENTER

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Can any of the company-specific risk be diversified away by investing in both Gerdau SA and CARPENTER 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 CARPENTER 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 CARPENTER TECHNOLOGY P, you can compare the effects of market volatilities on Gerdau SA and CARPENTER 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 CARPENTER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and CARPENTER.

Diversification Opportunities for Gerdau SA and CARPENTER

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Gerdau and CARPENTER is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Gerdau SA i.e., Gerdau SA and CARPENTER go up and down completely randomly.

Pair Corralation between Gerdau SA and CARPENTER

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the CARPENTER. In addition to that, Gerdau SA is 9.82 times more volatile than CARPENTER TECHNOLOGY P. It trades about -0.19 of its total potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.12 per unit of volatility. If you would invest  10,069  in CARPENTER TECHNOLOGY P on September 21, 2024 and sell it today you would lose (59.00) from holding CARPENTER TECHNOLOGY P or give up 0.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Gerdau SA ADR  vs.  CARPENTER TECHNOLOGY P

 Performance 
       Timeline  
Gerdau SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
CARPENTER TECHNOLOGY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gerdau SA and CARPENTER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gerdau SA and CARPENTER

The main advantage of trading using opposite Gerdau SA and CARPENTER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, CARPENTER 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 CARPENTER will offset losses from the drop in CARPENTER's long position.
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The idea behind Gerdau SA ADR and CARPENTER TECHNOLOGY P 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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