Correlation Between VFCO34 and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both VFCO34 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 VFCO34 and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VFCO34 and Gerdau SA, you can compare the effects of market volatilities on VFCO34 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 VFCO34 with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of VFCO34 and Gerdau SA.
Diversification Opportunities for VFCO34 and Gerdau SA
Poor diversification
The 3 months correlation between VFCO34 and Gerdau is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding VFCO34 and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and VFCO34 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 VFCO34 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 VFCO34 i.e., VFCO34 and Gerdau SA go up and down completely randomly.
Pair Corralation between VFCO34 and Gerdau SA
Assuming the 90 days trading horizon VFCO34 is expected to generate 2.59 times more return on investment than Gerdau SA. However, VFCO34 is 2.59 times more volatile than Gerdau SA. It trades about 0.1 of its potential returns per unit of risk. Gerdau SA is currently generating about 0.04 per unit of risk. If you would invest 4,467 in VFCO34 on September 28, 2024 and sell it today you would earn a total of 2,316 from holding VFCO34 or generate 51.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.05% |
| Values | Daily Returns |
VFCO34 vs. Gerdau SA
Performance |
| Timeline |
| VFCO34 |
| Gerdau SA |
VFCO34 and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VFCO34 and Gerdau SA
The main advantage of trading using opposite VFCO34 and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VFCO34 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.| VFCO34 vs. MAHLE Metal Leve | VFCO34 vs. Metalrgica Riosulense SA | VFCO34 vs. Tres Tentos Agroindustrial | VFCO34 vs. Capital One Financial |
| Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Banco Bradesco SA | Gerdau SA vs. Vale SA | Gerdau SA vs. Petrleo Brasileiro SA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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