Correlation Between Gerdau SA and Natural Resource

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

Diversification Opportunities for Gerdau SA and Natural Resource

0.12

Correlation Coefficient

Gerdau SA  Natural Resource

Average diversification

The 3 months correlation between Gerdau and Natural is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Natural Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Resource Partners 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 Natural Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Resource Partners has no effect on the direction of Gerdau SA i.e., Gerdau SA and Natural Resource go up and down completely randomly.

Pair Corralation between Gerdau SA and Natural Resource

Considering the 90-day investment horizon Gerdau SA ADR is expected to generate 1.74 times more return on investment than Natural Resource. However, Gerdau SA is 1.74 times more volatile than Natural Resource Partners. It trades about 0.11 of its potential returns per unit of risk. Natural Resource Partners is currently generating about 0.05 per unit of risk. If you would invest  251.00  in Gerdau SA ADR on May 7, 2025 and sell it today you would earn a total of  41.00  from holding Gerdau SA ADR or generate 16.33% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Natural Resource Partners

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.

Natural Resource Partners

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Resource Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Natural Resource is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Gerdau SA and Natural Resource

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

The idea behind Gerdau SA ADR and Natural Resource Partners 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.