Correlation Between Gerdau SA and Nucor Corp

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

Diversification Opportunities for Gerdau SA and Nucor Corp

0.04

Correlation Coefficient

Gerdau SA  Nucor Corp

Significant diversification

The 3 months correlation between Gerdau and Nucor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Nucor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor Corp 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 Nucor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor Corp has no effect on the direction of Gerdau SA i.e., Gerdau SA and Nucor Corp go up and down completely randomly.

Pair Corralation between Gerdau SA and Nucor Corp

Considering the 90-day investment horizon Gerdau SA ADR is expected to under-perform the Nucor Corp. In addition to that, Gerdau SA is 1.14 times more volatile than Nucor Corp. It trades about -0.03 of its total potential returns per unit of risk. Nucor Corp is currently generating about -0.01 per unit of volatility. If you would invest  17,104  in Nucor Corp on July 25, 2024 and sell it today you would lose (2,502) from holding Nucor Corp or give up 14.63% of portfolio value over 90 days.

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

Gerdau SA ADR  vs.  Nucor Corp

Gerdau SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nucor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nucor Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gerdau SA and Nucor Corp

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

The idea behind Gerdau SA ADR and Nucor Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..