Correlation Between Gerdau SA and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA and Micron Technology, you can compare the effects of market volatilities on Gerdau SA and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Micron Technology.
Diversification Opportunities for Gerdau SA and Micron Technology
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gerdau and Micron is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron 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 are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Gerdau SA i.e., Gerdau SA and Micron Technology go up and down completely randomly.
Pair Corralation between Gerdau SA and Micron Technology
Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.47 times more return on investment than Micron Technology. However, Gerdau SA is 2.14 times less risky than Micron Technology. It trades about -0.16 of its potential returns per unit of risk. Micron Technology is currently generating about -0.2 per unit of risk. If you would invest 7,100 in Gerdau SA on September 12, 2024 and sell it today you would lose (299.00) from holding Gerdau SA or give up 4.21% 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 vs. Micron Technology
Performance |
| Timeline |
| Gerdau SA |
| Micron Technology |
Gerdau SA and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Micron Technology
The main advantage of trading using opposite Gerdau SA and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| Gerdau SA vs. Martin Marietta Materials | Gerdau SA vs. Costco Wholesale | Gerdau SA vs. Monster Beverage Corp | Gerdau SA vs. FIBRA Storage |
| Micron Technology vs. GMxico Transportes SAB | Micron Technology vs. Verizon Communications | Micron Technology vs. Grupo Hotelero Santa | Micron Technology vs. KB Home |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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