Correlation Between Gerdau SA and Vanguard

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

Diversification Opportunities for Gerdau SA and Vanguard

0.54

Correlation Coefficient

Gerdau SA  Vanguard

Very weak diversification

The 3 months correlation between Gerdau and Vanguard is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA ADR and Vanguard SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Small 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Small has no effect on the direction of Gerdau SA i.e., Gerdau SA and Vanguard go up and down completely randomly.

Pair Corralation between Gerdau SA and Vanguard

Considering the 90-day investment horizon Gerdau SA ADR is expected to generate 1.81 times more return on investment than Vanguard. However, Gerdau SA is 1.81 times more volatile than Vanguard SP Small Cap. It trades about 0.11 of its potential returns per unit of risk. Vanguard SP Small Cap is currently generating about 0.12 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	Weak
Accuracy	100.0%
Values	Daily Returns

Gerdau SA ADR  vs.  Vanguard SP Small Cap

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.

Vanguard SP Small

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Small Cap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Gerdau SA and Vanguard

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

The idea behind Gerdau SA ADR and Vanguard SP Small Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..