Correlation Between Ternium SA and GMxico Transportes

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

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

Diversification Opportunities for Ternium SA and GMxico Transportes

-0.21

Correlation Coefficient

Ternium SA  GMxico Transportes

Very good diversification

The 3 months correlation between Ternium and GMxico is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB 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 are associated (or correlated) with GMxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Ternium SA i.e., Ternium SA and GMxico Transportes go up and down completely randomly.

Pair Corralation between Ternium SA and GMxico Transportes

Assuming the 90 days horizon Ternium SA is expected to generate 1.1 times more return on investment than GMxico Transportes. However, Ternium SA is 1.1 times more volatile than GMxico Transportes SAB. It trades about 0.01 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.01 per unit of risk. If you would invest  58,389  in Ternium SA on October 4, 2024 and sell it today you would earn a total of  2,211  from holding Ternium SA or generate 3.79% return on investment over 90 days.

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

Ternium SA  vs.  GMxico Transportes SAB

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GMxico Transportes SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GMxico Transportes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ternium SA and GMxico Transportes

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

The idea behind Ternium SA and GMxico Transportes SAB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.