Correlation Between Gerdau SA and Indo Global

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

Diversification Opportunities for Gerdau SA and Indo Global

-0.25

Correlation Coefficient

Gerdau SA  Indo Global

Very good diversification

The 3 months correlation between Gerdau and Indo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Indo Global Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Global Exchange 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 Indo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Global Exchange has no effect on the direction of Gerdau SA i.e., Gerdau SA and Indo Global go up and down completely randomly.

Pair Corralation between Gerdau SA and Indo Global

Considering the 90-day investment horizon Gerdau SA is expected to generate 1.58 times less return on investment than Indo Global. But when comparing it to its historical volatility, Gerdau SA ADR is 5.27 times less risky than Indo Global. It trades about 0.11 of its potential returns per unit of risk. Indo Global Exchange is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Indo Global Exchange on May 7, 2025 and sell it today you would lose (0.01) from holding Indo Global Exchange or give up 20.0% of portfolio value over 90 days.

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

Gerdau SA ADR  vs.  Indo Global Exchange

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.

Indo Global Exchange

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Global Exchange are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Indo Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Indo Global

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

The idea behind Gerdau SA ADR and Indo Global Exchange 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.