Correlation Between Grupo Simec and Ternium SA

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

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

Diversification Opportunities for Grupo Simec and Ternium SA

0.53

Correlation Coefficient

Grupo Simec  Ternium SA

Very weak diversification

The 3 months correlation between Grupo and Ternium is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Ternium SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA ADR and Grupo Simec 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 Grupo Simec SAB 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 ADR has no effect on the direction of Grupo Simec i.e., Grupo Simec and Ternium SA go up and down completely randomly.

Pair Corralation between Grupo Simec and Ternium SA

Considering the 90-day investment horizon Grupo Simec SAB is expected to generate 1.31 times more return on investment than Ternium SA. However, Grupo Simec is 1.31 times more volatile than Ternium SA ADR. It trades about 0.03 of its potential returns per unit of risk. Ternium SA ADR is currently generating about -0.39 per unit of risk. If you would invest  2,689  in Grupo Simec SAB on September 29, 2024 and sell it today you would earn a total of  26.00  from holding Grupo Simec SAB or generate 0.97% return on investment over 90 days.

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

Grupo Simec SAB  vs.  Ternium SA ADR

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Ternium SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ternium SA ADR 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 basic 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 Grupo Simec and Ternium SA

The main advantage of trading using opposite Grupo Simec and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB and Ternium SA ADR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.