Correlation Between Gerdau SA and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Embraer SA 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 Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA and Embraer SA, you can compare the effects of market volatilities on Gerdau SA and Embraer SA 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 Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Embraer SA.
Diversification Opportunities for Gerdau SA and Embraer SA
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gerdau and Embraer is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Embraer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer SA 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 Embraer SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embraer SA has no effect on the direction of Gerdau SA i.e., Gerdau SA and Embraer SA go up and down completely randomly.
Pair Corralation between Gerdau SA and Embraer SA
Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the Embraer SA. In addition to that, Gerdau SA is 1.04 times more volatile than Embraer SA. It trades about -0.12 of its total potential returns per unit of risk. Embraer SA is currently generating about 0.15 per unit of volatility. If you would invest 5,687 in Embraer SA on November 5, 2024 and sell it today you would earn a total of 283.00 from holding Embraer SA or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gerdau SA vs. Embraer SA
Performance |
| Timeline |
| Gerdau SA |
| Embraer SA |
Gerdau SA and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Embraer SA
The main advantage of trading using opposite Gerdau SA and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Embraer SA 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 Embraer SA will offset losses from the drop in Embraer SA's long position.| Gerdau SA vs. Usinas Siderrgicas de | Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Banco Bradesco SA | Gerdau SA vs. Vale SA |
| Embraer SA vs. Gol Linhas Areas | Embraer SA vs. Gerdau SA | Embraer SA vs. Companhia Siderrgica Nacional | Embraer SA vs. Usinas Siderrgicas de |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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