Correlation Between Gerdau SA and Aecon

Can any of the company-specific risk be diversified away by investing in both Gerdau SA and Aecon 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 Aecon 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 Aecon Group, you can compare the effects of market volatilities on Gerdau SA and Aecon 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 Aecon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Aecon.

Diversification Opportunities for Gerdau SA and Aecon

0.24

Correlation Coefficient

Gerdau SA  Aecon

Modest diversification

The 3 months correlation between Gerdau and Aecon is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group 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 Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of Gerdau SA i.e., Gerdau SA and Aecon go up and down completely randomly.

Pair Corralation between Gerdau SA and Aecon

Considering the 90-day investment horizon Gerdau SA is expected to generate 1.22 times less return on investment than Aecon. In addition to that, Gerdau SA is 1.28 times more volatile than Aecon Group. It trades about 0.11 of its total potential returns per unit of risk. Aecon Group is currently generating about 0.18 per unit of volatility. If you would invest  1,278  in Aecon Group on May 7, 2025 and sell it today you would earn a total of  277.00  from holding Aecon Group or generate 21.67% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Aecon Group

Gerdau SA ADR

Risk-Adjusted Performance

Fair

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.

Aecon Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aecon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Aecon

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

The idea behind Gerdau SA ADR and Aecon Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.