Correlation Between Ternium SA and Southwest Airlines

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

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

Diversification Opportunities for Ternium SA and Southwest Airlines

0.0

Correlation Coefficient

Ternium SA  Southwest Airlines

Pay attention - limited upside

The 3 months correlation between Ternium and Southwest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA and Southwest Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Ternium SA i.e., Ternium SA and Southwest Airlines go up and down completely randomly.

Pair Corralation between Ternium SA and Southwest Airlines

If you would invest  0.00  in Ternium SA on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Ternium SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Ternium SA  vs.  Southwest Airlines

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 fairly strong primary indicators, Ternium SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Southwest Airlines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southwest Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ternium SA and Southwest Airlines

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

The idea behind Ternium SA and Southwest Airlines 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.