Correlation Between Alphabet and Gerdau SA

Can any of the company-specific risk be diversified away by investing in both Alphabet and Gerdau SA 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 Alphabet and Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class C and Gerdau SA ADR, you can compare the effects of market volatilities on Alphabet and Gerdau SA 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 Alphabet with a short position of Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Gerdau SA.

Diversification Opportunities for Alphabet and Gerdau SA

0.29

Correlation Coefficient

Alphabet  Gerdau SA

Modest diversification

The 3 months correlation between Alphabet and Gerdau is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Gerdau SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA ADR and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA ADR has no effect on the direction of Alphabet i.e., Alphabet and Gerdau SA go up and down completely randomly.

Pair Corralation between Alphabet and Gerdau SA

Given the investment horizon of 90 days Alphabet is expected to generate 1.09 times less return on investment than Gerdau SA. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.6 times less risky than Gerdau SA. It trades about 0.08 of its potential returns per unit of risk. Gerdau SA ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  313.00  in Gerdau SA ADR on September 1, 2024 and sell it today you would earn a total of  23.00  from holding Gerdau SA ADR or generate 7.35% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Gerdau SA ADR

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Gerdau SA ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gerdau SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Gerdau SA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Alphabet and Gerdau SA

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

The idea behind Alphabet Inc Class C and Gerdau SA ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..