Correlation Between Gerdau SA and Ternium SA

Can any of the company-specific risk be diversified away by investing in both Gerdau 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 Gerdau 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 Gerdau SA and Ternium SA, you can compare the effects of market volatilities on Gerdau 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 Gerdau SA with a short position of Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gerdau SA and Ternium SA.

Diversification Opportunities for Gerdau SA and Ternium SA

-0.02

Correlation Coefficient

Gerdau SA  Ternium SA

Good diversification

The 3 months correlation between Gerdau and Ternium is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gerdau SA and Ternium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA and Gerdau 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 Gerdau 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 has no effect on the direction of Gerdau SA i.e., Gerdau SA and Ternium SA go up and down completely randomly.

Pair Corralation between Gerdau SA and Ternium SA

Assuming the 90 days trading horizon Gerdau SA is expected to generate 1.22 times more return on investment than Ternium SA. However, Gerdau SA is 1.22 times more volatile than Ternium SA. It trades about 0.0 of its potential returns per unit of risk. Ternium SA is currently generating about -0.14 per unit of risk. If you would invest  6,869  in Gerdau SA on September 26, 2024 and sell it today you would lose (68.00) from holding Gerdau SA or give up 0.99% of portfolio value over 90 days.

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

Gerdau SA  vs.  Ternium SA

Gerdau SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gerdau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gerdau SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ternium SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ternium SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly 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.

Pair Trading with Gerdau SA and Ternium SA

The main advantage of trading using opposite Gerdau SA and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gerdau 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 Gerdau SA 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.