Correlation Between Vale SA and Metalurgica Gerdau
Can any of the company-specific risk be diversified away by investing in both Vale SA and Metalurgica Gerdau 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 Vale SA and Metalurgica Gerdau into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Vale SA and Metalurgica Gerdau 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 Vale SA with a short position of Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Metalurgica Gerdau.
Diversification Opportunities for Vale SA and Metalurgica Gerdau
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vale and Metalurgica is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Vale SA 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 Vale SA are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Vale SA i.e., Vale SA and Metalurgica Gerdau go up and down completely randomly.
Pair Corralation between Vale SA and Metalurgica Gerdau
Assuming the 90 days trading horizon Vale SA is expected to generate 0.71 times more return on investment than Metalurgica Gerdau. However, Vale SA is 1.41 times less risky than Metalurgica Gerdau. It trades about 0.03 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about -0.1 per unit of risk. If you would invest 5,425 in Vale SA on December 2, 2024 and sell it today you would earn a total of 90.00 from holding Vale SA or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Metalurgica Gerdau SA
Performance |
| Timeline |
| Vale SA |
| Metalurgica Gerdau |
Vale SA and Metalurgica Gerdau Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Metalurgica Gerdau
The main advantage of trading using opposite Vale SA and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Metalurgica Gerdau 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 Metalurgica Gerdau will offset losses from the drop in Metalurgica Gerdau's long position.| Vale SA vs. Petrleo Brasileiro SA | Vale SA vs. Banco do Brasil | Vale SA vs. Ita Unibanco Holding | Vale SA vs. Banco Bradesco SA |
| Metalurgica Gerdau vs. Usinas Siderrgicas de | Metalurgica Gerdau vs. Gerdau SA | Metalurgica Gerdau vs. Companhia Siderrgica Nacional | Metalurgica Gerdau vs. Companhia Energtica 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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