Correlation Between United States and Gerdau SA

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

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

Diversification Opportunities for United States and Gerdau SA

-0.52

Correlation Coefficient

United States  Gerdau SA

Excellent diversification

The 3 months correlation between United and Gerdau is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA and United States 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 United States Steel 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 has no effect on the direction of United States i.e., United States and Gerdau SA go up and down completely randomly.

Pair Corralation between United States and Gerdau SA

Assuming the 90 days trading horizon United States Steel is expected to generate 0.87 times more return on investment than Gerdau SA. However, United States Steel is 1.15 times less risky than Gerdau SA. It trades about 0.37 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.47 per unit of risk. If you would invest  18,643  in United States Steel on March 19, 2024 and sell it today you would earn a total of  1,480  from holding United States Steel or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

United States Steel  vs.  Gerdau SA

United States Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United States is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gerdau SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United States and Gerdau SA

The main advantage of trading using opposite United States and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.