Correlation Between Promotora and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both Promotora and Gerdau 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 Promotora and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promotora y Operadora and Gerdau SA, you can compare the effects of market volatilities on Promotora and Gerdau 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 Promotora with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and Gerdau SA.
Diversification Opportunities for Promotora and Gerdau SA
Weak diversification
The 3 months correlation between Promotora and Gerdau is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and Promotora 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 Promotora y Operadora are associated (or correlated) with Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Promotora i.e., Promotora and Gerdau SA go up and down completely randomly.
Pair Corralation between Promotora and Gerdau SA
Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 0.93 times more return on investment than Gerdau SA. However, Promotora y Operadora is 1.08 times less risky than Gerdau SA. It trades about 0.03 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.03 per unit of risk. If you would invest 16,250 in Promotora y Operadora on August 31, 2024 and sell it today you would earn a total of 3,256 from holding Promotora y Operadora or generate 20.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Promotora y Operadora vs. Gerdau SA
Performance |
| Timeline |
| Promotora y Operadora |
| Gerdau SA |
Promotora and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promotora and Gerdau SA
The main advantage of trading using opposite Promotora and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promotora position performs unexpectedly, Gerdau 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 Gerdau SA will offset losses from the drop in Gerdau SA's long position.| Promotora vs. Gruma SAB de | Promotora vs. Grupo Aeroportuario del | Promotora vs. Kimberly Clark de Mxico |
| Gerdau SA vs. CVS Health | Gerdau SA vs. First Majestic Silver | Gerdau SA vs. Southern Copper | Gerdau SA vs. Capital One Financial |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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