Correlation Between Gerdau SA and United States

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

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

Diversification Opportunities for Gerdau SA and United States

0.5

Correlation Coefficient

Gerdau SA  United States

Very weak diversification

The 3 months correlation between Gerdau and United is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Gerdau SA i.e., Gerdau SA and United States go up and down completely randomly.

Pair Corralation between Gerdau SA and United States

Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.71 times more return on investment than United States. However, Gerdau SA is 1.41 times less risky than United States. It trades about 0.08 of its potential returns per unit of risk. United States Steel is currently generating about -0.05 per unit of risk. If you would invest  1,605  in Gerdau SA on September 25, 2024 and sell it today you would earn a total of  146.00  from holding Gerdau SA or generate 9.1% return on investment over 90 days.

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

Gerdau SA  vs.  United States Steel

Gerdau SA

Risk-Adjusted Performance

6 of 100

Insignificant

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.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gerdau SA and United States

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

The idea behind Gerdau SA and United States Steel 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.