Correlation Between Gerdau SA and KeyCorp

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

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

Diversification Opportunities for Gerdau SA and KeyCorp

0.68

Correlation Coefficient

Gerdau SA  KeyCorp

Poor diversification

The 3 months correlation between Gerdau and KeyCorp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Gerdau SA i.e., Gerdau SA and KeyCorp go up and down completely randomly.

Pair Corralation between Gerdau SA and KeyCorp

Assuming the 90 days trading horizon Gerdau SA is expected to under-perform the KeyCorp. In addition to that, Gerdau SA is 1.06 times more volatile than KeyCorp. It trades about -0.27 of its total potential returns per unit of risk. KeyCorp is currently generating about -0.15 per unit of volatility. If you would invest  11,314  in KeyCorp on September 25, 2024 and sell it today you would lose (644.00) from holding KeyCorp or give up 5.69% of portfolio value over 90 days.

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

Gerdau SA  vs.  KeyCorp

Gerdau SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 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, Gerdau SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KeyCorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, KeyCorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and KeyCorp

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

The idea behind Gerdau SA and KeyCorp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.