Correlation Between Metalurgica Gerdau and Este Lauder

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

By analyzing existing cross correlation between Metalurgica Gerdau SA and The Este Lauder, you can compare the effects of market volatilities on Metalurgica Gerdau and Este Lauder 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 Metalurgica Gerdau with a short position of Este Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and Este Lauder.

Diversification Opportunities for Metalurgica Gerdau and Este Lauder

-0.25

Correlation Coefficient

Metalurgica Gerdau  Este Lauder

Very good diversification

The 3 months correlation between Metalurgica and Este is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder and Metalurgica Gerdau 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 Metalurgica Gerdau SA are associated (or correlated) with Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and Este Lauder go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and Este Lauder

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.5 times more return on investment than Este Lauder. However, Metalurgica Gerdau SA is 2.02 times less risky than Este Lauder. It trades about 0.04 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.02 per unit of risk. If you would invest  1,059  in Metalurgica Gerdau SA on September 24, 2024 and sell it today you would earn a total of  47.00  from holding Metalurgica Gerdau SA or generate 4.44% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  The Este Lauder

Metalurgica Gerdau

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Metalurgica Gerdau is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Este Lauder is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalurgica Gerdau and Este Lauder

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

The idea behind Metalurgica Gerdau SA and The Este Lauder 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.