Correlation Between Metalurgica Gerdau and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Basic Materials 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 Basic Materials 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 Basic Materials, you can compare the effects of market volatilities on Metalurgica Gerdau and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Basic Materials.
Diversification Opportunities for Metalurgica Gerdau and Basic Materials
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Metalurgica and Basic is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Basic Materials go up and down completely randomly.
Pair Corralation between Metalurgica Gerdau and Basic Materials
Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 1.75 times more return on investment than Basic Materials. However, Metalurgica Gerdau is 1.75 times more volatile than Basic Materials. It trades about 0.04 of its potential returns per unit of risk. Basic Materials is currently generating about 0.03 per unit of risk. If you would invest 962.00 in Metalurgica Gerdau SA on September 1, 2024 and sell it today you would earn a total of 184.00 from holding Metalurgica Gerdau SA or generate 19.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Metalurgica Gerdau SA vs. Basic Materials
Performance |
| Timeline |
Metalurgica Gerdau and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Metalurgica Gerdau SA
Pair trading matchups for Metalurgica Gerdau
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Metalurgica Gerdau and Basic Materials
The main advantage of trading using opposite Metalurgica Gerdau and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' 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 |
| Basic Materials vs. GP Investments | Basic Materials vs. TAL Education Group | Basic Materials vs. Deutsche Bank Aktiengesellschaft | Basic Materials vs. STMicroelectronics NV |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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