Correlation Between First Majestic and Ternium SA

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

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

Diversification Opportunities for First Majestic and Ternium SA

0.45

Correlation Coefficient

First Majestic  Ternium SA

Very weak diversification

The 3 months correlation between First and Ternium is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver and Ternium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA and First Majestic 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 First Majestic Silver 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 has no effect on the direction of First Majestic i.e., First Majestic and Ternium SA go up and down completely randomly.

Pair Corralation between First Majestic and Ternium SA

Assuming the 90 days horizon First Majestic is expected to generate 1.13 times less return on investment than Ternium SA. But when comparing it to its historical volatility, First Majestic Silver is 1.04 times less risky than Ternium SA. It trades about 0.16 of its potential returns per unit of risk. Ternium SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  58,400  in Ternium SA on December 20, 2024 and sell it today you would earn a total of  7,599  from holding Ternium SA or generate 13.01% return on investment over 90 days.

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

First Majestic Silver  vs.  Ternium SA

First Majestic Silver

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Majestic Silver are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, First Majestic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ternium SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Ternium SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Majestic and Ternium SA

The main advantage of trading using opposite First Majestic and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic 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 First Majestic Silver and Ternium SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.