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

-0.47

Correlation Coefficient

Gerdau SA  Companhia Paranaense

Very good diversification

The 3 months correlation between Gerdau and Companhia is -0.47. 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 3.99 times less return on investment than Companhia Paranaense. In addition to that, Gerdau SA is 1.17 times more volatile than Companhia Paranaense de. It trades about 0.01 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.05 per unit of volatility. If you would invest  740.00  in Companhia Paranaense de on September 9, 2024 and sell it today you would earn a total of  219.00  from holding Companhia Paranaense de or generate 29.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.94%
Values	Daily Returns

Gerdau SA  vs.  Companhia Paranaense de

Gerdau SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA are ranked lower than 8 (%) 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.

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

The idea behind Gerdau SA and Companhia Paranaense de 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.