Correlation Between Gerdau SA and Ta Chen

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

By analyzing existing cross correlation between Gerdau SA and Ta Chen Stainless, you can compare the effects of market volatilities on Gerdau SA and Ta Chen 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 Ta Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Ta Chen.

Diversification Opportunities for Gerdau SA and Ta Chen

0.25

Correlation Coefficient

Gerdau SA  Ta Chen

Modest diversification

The 3 months correlation between Gerdau and 2027 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Ta Chen Stainless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Chen Stainless 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 are associated (or correlated) with Ta Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Chen Stainless has no effect on the direction of Gerdau SA i.e., Gerdau SA and Ta Chen go up and down completely randomly.

Pair Corralation between Gerdau SA and Ta Chen

Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.98 times more return on investment than Ta Chen. However, Gerdau SA is 1.02 times less risky than Ta Chen. It trades about 0.17 of its potential returns per unit of risk. Ta Chen Stainless is currently generating about 0.01 per unit of risk. If you would invest  1,642  in Gerdau SA on September 13, 2024 and sell it today you would earn a total of  364.00  from holding Gerdau SA or generate 22.17% return on investment over 90 days.

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

Gerdau SA  vs.  Ta Chen Stainless

Gerdau SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gerdau SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ta Chen Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ta Chen Stainless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ta Chen is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gerdau SA and Ta Chen

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

The idea behind Gerdau SA and Ta Chen Stainless 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.