Correlation Between Gerdau SA and Reliance Steel

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Reliance Steel 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 Gerdau SA and Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gerdau SA ADR and Reliance Steel Aluminum, you can compare the effects of market volatilities on Gerdau SA and Reliance Steel 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 Gerdau SA with a short position of Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Reliance Steel.

Diversification Opportunities for Gerdau SA and Reliance Steel

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Gerdau and Reliance is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and Gerdau 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 Gerdau SA ADR are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of Gerdau SA i.e., Gerdau SA and Reliance Steel go up and down completely randomly.

Pair Corralation between Gerdau SA and Reliance Steel

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Reliance Steel. In addition to that, Gerdau SA is 1.25 times more volatile than Reliance Steel Aluminum. It trades about 0.0 of its total potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.08 per unit of volatility. If you would invest  25,303  in Reliance Steel Aluminum on December 29, 2023 and sell it today you would earn a total of  8,387  from holding Reliance Steel Aluminum or generate 33.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Gerdau SA ADR  vs.  Reliance Steel Aluminum

 Performance 
       Timeline  
Gerdau SA ADR 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Reliance Steel Aluminum 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Reliance Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gerdau SA and Reliance Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gerdau SA and Reliance Steel

The main advantage of trading using opposite Gerdau SA and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau SA position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.
The idea behind Gerdau SA ADR and Reliance Steel Aluminum 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.
Check out your portfolio center.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

Other Complementary Tools

Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Stocks Directory
Find actively traded stocks across global markets
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
CEOs Directory
Screen CEOs from public companies around the world
Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities