Correlation Between Gerdau SA and Rio Paranapanema
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Rio Paranapanema 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 Rio Paranapanema into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA and Rio Paranapanema Energia, you can compare the effects of market volatilities on Gerdau SA and Rio Paranapanema 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 Rio Paranapanema. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Rio Paranapanema.
Diversification Opportunities for Gerdau SA and Rio Paranapanema
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gerdau and Rio is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Rio Paranapanema Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Paranapanema Energia 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 Rio Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Paranapanema Energia has no effect on the direction of Gerdau SA i.e., Gerdau SA and Rio Paranapanema go up and down completely randomly.
Pair Corralation between Gerdau SA and Rio Paranapanema
Assuming the 90 days trading horizon Gerdau SA is expected to generate 6.55 times less return on investment than Rio Paranapanema. But when comparing it to its historical volatility, Gerdau SA is 1.6 times less risky than Rio Paranapanema. It trades about 0.01 of its potential returns per unit of risk. Rio Paranapanema Energia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,570 in Rio Paranapanema Energia on September 12, 2024 and sell it today you would earn a total of 530.00 from holding Rio Paranapanema Energia or generate 20.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.86% |
| Values | Daily Returns |
Gerdau SA vs. Rio Paranapanema Energia
Performance |
| Timeline |
| Gerdau SA |
| Rio Paranapanema Energia |
Gerdau SA and Rio Paranapanema Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gerdau SA and Rio Paranapanema
The main advantage of trading using opposite Gerdau SA and Rio Paranapanema positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Rio Paranapanema 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 Rio Paranapanema will offset losses from the drop in Rio Paranapanema'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 |
| Rio Paranapanema vs. Companhia Energtica do | Rio Paranapanema vs. Rio Paranapanema Energia | Rio Paranapanema vs. Grazziotin SA | Rio Paranapanema vs. Empresa Metropolitana 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |