Correlation Between Gerdau SA and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Companhia Paranaense 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 Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA and Companhia Paranaense de, you can compare the effects of market volatilities on Gerdau SA and Companhia Paranaense 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 Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Companhia Paranaense.
Diversification Opportunities for Gerdau SA and Companhia Paranaense
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gerdau and Companhia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Gerdau SA i.e., Gerdau SA and Companhia Paranaense go up and down completely randomly.
Pair Corralation between Gerdau SA and Companhia Paranaense
Assuming the 90 days trading horizon Gerdau SA is expected to generate 1.13 times more return on investment than Companhia Paranaense. However, Gerdau SA is 1.13 times more volatile than Companhia Paranaense de. It trades about 0.14 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.08 per unit of risk. If you would invest 1,790 in Gerdau SA on September 6, 2024 and sell it today you would earn a total of 292.00 from holding Gerdau SA or generate 16.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Gerdau SA vs. Companhia Paranaense de
Performance |
Timeline |
Gerdau SA |
Companhia Paranaense |
Gerdau SA and Companhia Paranaense Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gerdau SA and Companhia Paranaense
The main advantage of trading using opposite Gerdau SA and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Companhia Paranaense 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 Companhia Paranaense will offset losses from the drop in Companhia Paranaense's long position.Gerdau SA vs. Usinas Siderrgicas de | Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Companhia Energtica de | Gerdau SA vs. Braskem SA |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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