Correlation Between Gerdau SA and HUMANA

Can any of the company-specific risk be diversified away by investing in both Gerdau SA and HUMANA 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 Gerdau SA and HUMANA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gerdau SA ADR and HUMANA INC, you can compare the effects of market volatilities on Gerdau SA and HUMANA 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 Gerdau SA with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and HUMANA.

Diversification Opportunities for Gerdau SA and HUMANA

0.03

Correlation Coefficient

Gerdau SA  HUMANA

Significant diversification

The 3 months correlation between Gerdau and HUMANA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Gerdau 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 Gerdau SA ADR are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Gerdau SA i.e., Gerdau SA and HUMANA go up and down completely randomly.

Pair Corralation between Gerdau SA and HUMANA

Considering the 90-day investment horizon Gerdau SA ADR is expected to generate 3.16 times more return on investment than HUMANA. However, Gerdau SA is 3.16 times more volatile than HUMANA INC. It trades about 0.04 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.04 per unit of risk. If you would invest  302.00  in Gerdau SA ADR on September 15, 2024 and sell it today you would earn a total of  24.00  from holding Gerdau SA ADR or generate 7.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Gerdau SA ADR  vs.  HUMANA INC

Gerdau SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with Gerdau SA and HUMANA

The main advantage of trading using opposite Gerdau SA and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, HUMANA 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 HUMANA will offset losses from the drop in HUMANA's long position.

The idea behind Gerdau SA ADR and HUMANA INC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.