Correlation Between Braskem SA and Metalurgica Gerdau

Can any of the company-specific risk be diversified away by investing in both Braskem 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 Braskem 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 Braskem SA and Metalurgica Gerdau SA, you can compare the effects of market volatilities on Braskem 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 Braskem SA with a short position of Metalurgica Gerdau. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braskem SA and Metalurgica Gerdau.

Diversification Opportunities for Braskem SA and Metalurgica Gerdau

-0.63

Correlation Coefficient

Braskem SA  Metalurgica Gerdau

Excellent diversification

The 3 months correlation between Braskem and Metalurgica is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Braskem 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 Braskem 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 Braskem 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 Braskem SA i.e., Braskem SA and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Braskem SA and Metalurgica Gerdau

Assuming the 90 days trading horizon Braskem SA is expected to under-perform the Metalurgica Gerdau. In addition to that, Braskem SA is 1.39 times more volatile than Metalurgica Gerdau SA. It trades about -0.21 of its total potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.08 per unit of volatility. If you would invest  1,054  in Metalurgica Gerdau SA on September 19, 2024 and sell it today you would earn a total of  100.00  from holding Metalurgica Gerdau SA or generate 9.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Braskem SA  vs.  Metalurgica Gerdau SA

Braskem SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braskem SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Metalurgica Gerdau

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Braskem SA and Metalurgica Gerdau

The main advantage of trading using opposite Braskem SA and Metalurgica Gerdau positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braskem 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.

The idea behind Braskem SA and Metalurgica Gerdau SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.