Correlation Between Metalurgica Gerdau and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on Metalurgica Gerdau and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Prudential Financial.
Diversification Opportunities for Metalurgica Gerdau and Prudential Financial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metalurgica and Prudential is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Prudential Financial go up and down completely randomly.
Pair Corralation between Metalurgica Gerdau and Prudential Financial
Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.88 times more return on investment than Prudential Financial. However, Metalurgica Gerdau SA is 1.13 times less risky than Prudential Financial. It trades about 0.02 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.24 per unit of risk. If you would invest 969.00 in Metalurgica Gerdau SA on November 18, 2024 and sell it today you would earn a total of 4.00 from holding Metalurgica Gerdau SA or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Metalurgica Gerdau SA vs. Prudential Financial
Performance |
| Timeline |
| Metalurgica Gerdau |
| Prudential Financial |
Metalurgica Gerdau and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metalurgica Gerdau and Prudential Financial
The main advantage of trading using opposite Metalurgica Gerdau and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalurgica Gerdau position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial'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 |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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