Correlation Between Metalurgica Gerdau and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Braskem 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 Metalurgica Gerdau and Braskem SA 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 Braskem SA, you can compare the effects of market volatilities on Metalurgica Gerdau and Braskem 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 Metalurgica Gerdau with a short position of Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Braskem SA.
Diversification Opportunities for Metalurgica Gerdau and Braskem SA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Metalurgica and Braskem is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA 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 Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Braskem SA go up and down completely randomly.
Pair Corralation between Metalurgica Gerdau and Braskem SA
Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 1.06 times more return on investment than Braskem SA. However, Metalurgica Gerdau is 1.06 times more volatile than Braskem SA. It trades about 0.19 of its potential returns per unit of risk. Braskem SA is currently generating about -0.31 per unit of risk. If you would invest 1,008 in Metalurgica Gerdau SA on August 28, 2024 and sell it today you would earn a total of 91.00 from holding Metalurgica Gerdau SA or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metalurgica Gerdau SA vs. Braskem SA
Performance |
| Timeline |
| Metalurgica Gerdau |
| Braskem SA |
Metalurgica Gerdau and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metalurgica Gerdau and Braskem SA
The main advantage of trading using opposite Metalurgica Gerdau and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, Braskem 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 Braskem SA will offset losses from the drop in Braskem SA's long position.| Metalurgica Gerdau vs. Usinas Siderrgicas de | Metalurgica Gerdau vs. Gerdau SA | Metalurgica Gerdau vs. Companhia Siderrgica Nacional | Metalurgica Gerdau vs. Companhia Energtica de |
| Braskem SA vs. Metalurgica Gerdau SA | Braskem SA vs. Companhia Siderrgica Nacional | Braskem SA vs. Companhia Energtica de | Braskem SA vs. Companhia Paranaense 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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