Correlation Between Capex SA and Ternium SA

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

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

Diversification Opportunities for Capex SA and Ternium SA

-0.53

Correlation Coefficient

Capex SA  Ternium SA

Excellent diversification

The 3 months correlation between Capex and Ternium is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Capex SA and Ternium SA DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA DRC and Capex 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 Capex SA are associated (or correlated) with Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA DRC has no effect on the direction of Capex SA i.e., Capex SA and Ternium SA go up and down completely randomly.

Pair Corralation between Capex SA and Ternium SA

Assuming the 90 days trading horizon Capex SA is expected to under-perform the Ternium SA. In addition to that, Capex SA is 2.15 times more volatile than Ternium SA DRC. It trades about -0.14 of its total potential returns per unit of risk. Ternium SA DRC is currently generating about 0.16 per unit of volatility. If you would invest  852,000  in Ternium SA DRC on December 30, 2024 and sell it today you would earn a total of  160,500  from holding Ternium SA DRC or generate 18.84% return on investment over 90 days.

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

Capex SA  vs.  Ternium SA DRC

Capex SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capex SA 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ternium SA DRC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA DRC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ternium SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capex SA and Ternium SA

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

The idea behind Capex SA and Ternium SA DRC 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.