Correlation Between Gerdau SA and T4F Entretenimento

Can any of the company-specific risk be diversified away by investing in both Gerdau SA and T4F Entretenimento 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 T4F Entretenimento into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gerdau SA and T4F Entretenimento SA, you can compare the effects of market volatilities on Gerdau SA and T4F Entretenimento 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 T4F Entretenimento. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and T4F Entretenimento.

Diversification Opportunities for Gerdau SA and T4F Entretenimento

-0.73

Correlation Coefficient

Gerdau SA  T4F Entretenimento

Pay attention - limited upside

The 3 months correlation between Gerdau and T4F is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and T4F Entretenimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T4F Entretenimento 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 T4F Entretenimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T4F Entretenimento has no effect on the direction of Gerdau SA i.e., Gerdau SA and T4F Entretenimento go up and down completely randomly.

Pair Corralation between Gerdau SA and T4F Entretenimento

Assuming the 90 days trading horizon Gerdau SA is expected to generate 0.63 times more return on investment than T4F Entretenimento. However, Gerdau SA is 1.58 times less risky than T4F Entretenimento. It trades about 0.0 of its potential returns per unit of risk. T4F Entretenimento SA is currently generating about -0.21 per unit of risk. If you would invest  1,881  in Gerdau SA on September 28, 2024 and sell it today you would lose (10.00) from holding Gerdau SA or give up 0.53% of portfolio value over 90 days.

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

Gerdau SA  vs.  T4F Entretenimento SA

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gerdau SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

T4F Entretenimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T4F Entretenimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gerdau SA and T4F Entretenimento

The main advantage of trading using opposite Gerdau SA and T4F Entretenimento positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, T4F Entretenimento 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 T4F Entretenimento will offset losses from the drop in T4F Entretenimento's long position.

The idea behind Gerdau SA and T4F Entretenimento SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.