Correlation Between Metalurgica Gerdau and GP Investments

Can any of the company-specific risk be diversified away by investing in both Metalurgica Gerdau and GP Investments 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 GP Investments 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 GP Investments, you can compare the effects of market volatilities on Metalurgica Gerdau and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalurgica Gerdau and GP Investments.

Diversification Opportunities for Metalurgica Gerdau and GP Investments

0.14

Correlation Coefficient

Metalurgica Gerdau  GP Investments

Average diversification

The 3 months correlation between Metalurgica and GPIV33 is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and GP Investments go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and GP Investments

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to generate 0.46 times more return on investment than GP Investments. However, Metalurgica Gerdau SA is 2.18 times less risky than GP Investments. It trades about 0.12 of its potential returns per unit of risk. GP Investments is currently generating about -0.01 per unit of risk. If you would invest  1,005  in Metalurgica Gerdau SA on September 3, 2024 and sell it today you would earn a total of  141.00  from holding Metalurgica Gerdau SA or generate 14.03% return on investment over 90 days.

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

Metalurgica Gerdau SA  vs.  GP Investments

Metalurgica Gerdau

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau unveiled solid returns over the last few months and may actually be approaching a breakup point.

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments 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 GP Investments

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

The idea behind Metalurgica Gerdau SA and GP Investments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.