Correlation Between Klabin SA and Metalurgica Gerdau

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

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

Diversification Opportunities for Klabin SA and Metalurgica Gerdau

0.68

Correlation Coefficient

Klabin SA  Metalurgica Gerdau

Poor diversification

The 3 months correlation between Klabin and Metalurgica is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Klabin SA and Metalurgica Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Gerdau and Klabin 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 Klabin SA are associated (or correlated) with Metalurgica Gerdau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Gerdau has no effect on the direction of Klabin SA i.e., Klabin SA and Metalurgica Gerdau go up and down completely randomly.

Pair Corralation between Klabin SA and Metalurgica Gerdau

Assuming the 90 days trading horizon Klabin SA is expected to generate 1.33 times less return on investment than Metalurgica Gerdau. But when comparing it to its historical volatility, Klabin SA is 1.13 times less risky than Metalurgica Gerdau. It trades about 0.08 of its potential returns per unit of risk. Metalurgica Gerdau SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,062  in Metalurgica Gerdau SA on September 4, 2024 and sell it today you would earn a total of  106.00  from holding Metalurgica Gerdau SA or generate 9.98% return on investment over 90 days.

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

Klabin SA  vs.  Metalurgica Gerdau SA

Klabin SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Klabin SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Klabin SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Metalurgica Gerdau

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metalurgica Gerdau SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalurgica Gerdau may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Klabin SA and Metalurgica Gerdau

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

The idea behind Klabin SA and Metalurgica Gerdau 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.