Correlation Between Gerdau SA and Gentherm

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

Diversification Opportunities for Gerdau SA and Gentherm

0.64

Correlation Coefficient

Gerdau SA  Gentherm

Poor diversification

The 3 months correlation between Gerdau and Gentherm is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Gentherm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentherm 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 Gentherm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentherm has no effect on the direction of Gerdau SA i.e., Gerdau SA and Gentherm go up and down completely randomly.

Pair Corralation between Gerdau SA and Gentherm

Considering the 90-day investment horizon Gerdau SA is expected to generate 1.41 times less return on investment than Gentherm. In addition to that, Gerdau SA is 1.11 times more volatile than Gentherm. It trades about 0.11 of its total potential returns per unit of risk. Gentherm is currently generating about 0.18 per unit of volatility. If you would invest  2,587  in Gentherm on May 7, 2025 and sell it today you would earn a total of  649.00  from holding Gentherm or generate 25.09% return on investment over 90 days.

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

Gerdau SA ADR  vs.  Gentherm

Gerdau SA ADR

Risk-Adjusted Performance

OK

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.

Gentherm

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gentherm are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Gentherm displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gerdau SA and Gentherm

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

The idea behind Gerdau SA ADR and Gentherm 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 Commodity Directory module to find actively traded commodities issued by global exchanges.