Correlation Between Ternium SA and United States

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

By analyzing existing cross correlation between Ternium SA DRC and United States Steel, you can compare the effects of market volatilities on Ternium SA and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and United States.

Diversification Opportunities for Ternium SA and United States

0.19

Correlation Coefficient

Ternium SA  United States

Average diversification

The 3 months correlation between Ternium and United is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 DRC are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Ternium SA i.e., Ternium SA and United States go up and down completely randomly.

Pair Corralation between Ternium SA and United States

Assuming the 90 days trading horizon Ternium SA DRC is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA DRC is 1.58 times less risky than United States. The stock trades about -0.12 of its potential returns per unit of risk. The United States Steel is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,275,000  in United States Steel on September 5, 2024 and sell it today you would earn a total of  112,500  from holding United States Steel or generate 8.82% return on investment over 90 days.

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

Ternium SA DRC  vs.  United States Steel

Ternium SA DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ternium SA DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

United States Steel

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ternium SA and United States

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

The idea behind Ternium SA DRC and United States Steel 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.