Correlation Between CTS and Gerdau SA

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

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

Diversification Opportunities for CTS and Gerdau SA

0.59

Correlation Coefficient

CTS  Gerdau SA

Very weak diversification

The 3 months correlation between CTS and Gerdau is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. 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 CTS 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 CTS Corporation 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 CTS i.e., CTS and Gerdau SA go up and down completely randomly.

Pair Corralation between CTS and Gerdau SA

Considering the 90-day investment horizon CTS Corporation is expected to under-perform the Gerdau SA. But the stock apears to be less risky and, when comparing its historical volatility, CTS Corporation is 1.27 times less risky than Gerdau SA. The stock trades about -0.3 of its potential returns per unit of risk. The Gerdau SA ADR is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  307.00  in Gerdau SA ADR on May 7, 2025 and sell it today you would lose (15.00) from holding Gerdau SA ADR or give up 4.89% of portfolio value over 90 days.

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

CTS Corp.  vs.  Gerdau SA ADR

CTS Corporation

Risk-Adjusted Performance

Very Weak

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

Gerdau SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Gerdau SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTS and Gerdau SA

The main advantage of trading using opposite CTS and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTS 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 CTS Corporation 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.