Correlation Between Thrivent High and Gerdau SA

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

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

Diversification Opportunities for Thrivent High and Gerdau SA

0.65

Correlation Coefficient

Thrivent High  Gerdau SA

Poor diversification

The 3 months correlation between Thrivent and Gerdau is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Gerdau SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA ADR and Thrivent High 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 Thrivent High Yield are associated (or correlated) with Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA ADR has no effect on the direction of Thrivent High i.e., Thrivent High and Gerdau SA go up and down completely randomly.

Pair Corralation between Thrivent High and Gerdau SA

Assuming the 90 days horizon Thrivent High Yield is expected to generate 0.09 times more return on investment than Gerdau SA. However, Thrivent High Yield is 11.63 times less risky than Gerdau SA. It trades about 0.0 of its potential returns per unit of risk. Gerdau SA ADR is currently generating about -0.07 per unit of risk. If you would invest  425.00  in Thrivent High Yield on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Thrivent High Yield or generate 0.0% return on investment over 90 days.

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

Thrivent High Yield  vs.  Gerdau SA ADR

Thrivent High Yield

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gerdau SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Thrivent High and Gerdau SA

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

The idea behind Thrivent High Yield and Gerdau SA ADR 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.