Correlation Between Ternium SA and Acerinox
Can any of the company-specific risk be diversified away by investing in both Ternium SA and Acerinox 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 Ternium SA and Acerinox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ternium SA ADR and Acerinox SA ADR, you can compare the effects of market volatilities on Ternium SA and Acerinox 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 Ternium SA with a short position of Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Acerinox.
Diversification Opportunities for Ternium SA and Acerinox
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ternium and Acerinox is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR and Ternium 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 Ternium SA ADR are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Ternium SA i.e., Ternium SA and Acerinox go up and down completely randomly.
Pair Corralation between Ternium SA and Acerinox
Allowing for the 90-day total investment horizon Ternium SA is expected to generate 1.68 times less return on investment than Acerinox. But when comparing it to its historical volatility, Ternium SA ADR is 2.02 times less risky than Acerinox. It trades about 0.03 of its potential returns per unit of risk. Acerinox SA ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 432.00 in Acerinox SA ADR on August 28, 2024 and sell it today you would earn a total of 68.00 from holding Acerinox SA ADR or generate 15.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 87.7% |
| Values | Daily Returns |
Ternium SA ADR vs. Acerinox SA ADR
Performance |
| Timeline |
| Ternium SA ADR |
| Acerinox SA ADR |
Ternium SA and Acerinox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ternium SA and Acerinox
The main advantage of trading using opposite Ternium SA and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.The idea behind Ternium SA ADR and Acerinox 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.| Acerinox vs. Algoma Steel Group | Acerinox vs. Synalloy | Acerinox vs. Algoma Steel Group | Acerinox vs. Aperam PK |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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