Correlation Between Metalurgica Gerdau and Capital One
Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Capital One 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 Metalurgica Gerdau and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metalurgica Gerdau SA and Capital One Financial, you can compare the effects of market volatilities on Metalurgica Gerdau and Capital One 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 Metalurgica Gerdau with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Capital One.
Diversification Opportunities for Metalurgica Gerdau and Capital One
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Metalurgica and Capital is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Metalurgica Gerdau 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 Metalurgica Gerdau SA are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Capital One go up and down completely randomly.
Pair Corralation between Metalurgica Gerdau and Capital One
Assuming the 90 days trading horizon Metalurgica Gerdau is expected to generate 1.68 times less return on investment than Capital One. But when comparing it to its historical volatility, Metalurgica Gerdau SA is 1.36 times less risky than Capital One. It trades about 0.3 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 47,114 in Capital One Financial on September 2, 2024 and sell it today you would earn a total of 12,452 from holding Capital One Financial or generate 26.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metalurgica Gerdau SA vs. Capital One Financial
Performance |
| Timeline |
| Metalurgica Gerdau |
| Capital One Financial |
Metalurgica Gerdau and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metalurgica Gerdau and Capital One
The main advantage of trading using opposite Metalurgica Gerdau and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Metalurgica Gerdau vs. Companhia Paranaense de | Metalurgica Gerdau vs. Fras le SA | Metalurgica Gerdau vs. Energisa SA | Metalurgica Gerdau vs. Clave Indices De |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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