Correlation Between Ternium SA and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Ternium SA and POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings, you can compare the effects of market volatilities on Ternium SA and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and POSCO Holdings.
Diversification Opportunities for Ternium SA and POSCO Holdings
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ternium and POSCO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Ternium SA i.e., Ternium SA and POSCO Holdings go up and down completely randomly.
Pair Corralation between Ternium SA and POSCO Holdings
Allowing for the 90-day total investment horizon Ternium SA ADR is expected to generate 0.69 times more return on investment than POSCO Holdings. However, Ternium SA ADR is 1.44 times less risky than POSCO Holdings. It trades about -0.08 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.22 per unit of risk. If you would invest 3,470 in Ternium SA ADR on August 27, 2024 and sell it today you would lose (127.00) from holding Ternium SA ADR or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ternium SA ADR vs. POSCO Holdings
Performance |
| Timeline |
| Ternium SA ADR |
| POSCO Holdings |
Ternium SA and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ternium SA and POSCO Holdings
The main advantage of trading using opposite Ternium SA and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.The idea behind Ternium SA ADR and POSCO Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |