Correlation Between Gerdau SA and Graphite One

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

Diversification Opportunities for Gerdau SA and Graphite One

-0.2

Correlation Coefficient

Gerdau SA  Graphite One

Good diversification

The 3 months correlation between Gerdau and Graphite is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One 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 Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of Gerdau SA i.e., Gerdau SA and Graphite One go up and down completely randomly.

Pair Corralation between Gerdau SA and Graphite One

Considering the 90-day investment horizon Gerdau SA is expected to generate 3.21 times less return on investment than Graphite One. But when comparing it to its historical volatility, Gerdau SA ADR is 2.49 times less risky than Graphite One. It trades about 0.08 of its potential returns per unit of risk. Graphite One is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  79.00  in Graphite One on May 6, 2025 and sell it today you would earn a total of  28.00  from holding Graphite One or generate 35.44% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Graphite One

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 6 (%) 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.

Graphite One

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Graphite One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Graphite One

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

The idea behind Gerdau SA ADR and Graphite One 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.