Correlation Between Metalurgica Gerdau and GoPro

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

Diversification Opportunities for Metalurgica Gerdau and GoPro

0.06

Correlation Coefficient

Metalurgica Gerdau  GoPro

Significant diversification

The 3 months correlation between Metalurgica and GoPro is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Metalurgica Gerdau SA and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Metalurgica Gerdau i.e., Metalurgica Gerdau and GoPro go up and down completely randomly.

Pair Corralation between Metalurgica Gerdau and GoPro

Assuming the 90 days trading horizon Metalurgica Gerdau SA is expected to under-perform the GoPro. But the preferred stock apears to be less risky and, when comparing its historical volatility, Metalurgica Gerdau SA is 2.19 times less risky than GoPro. The preferred stock trades about -0.01 of its potential returns per unit of risk. The GoPro Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  695.00  in GoPro Inc on September 28, 2024 and sell it today you would lose (13.00) from holding GoPro Inc or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Metalurgica Gerdau SA  vs.  GoPro Inc

Metalurgica Gerdau

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalurgica Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

GoPro Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoPro Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GoPro 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 GoPro

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

The idea behind Metalurgica Gerdau SA and GoPro Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.