Correlation Between Ternium SA and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Ternium SA and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ternium SA and Verizon Communications, you can compare the effects of market volatilities on Ternium SA and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Verizon Communications.
Diversification Opportunities for Ternium SA and Verizon Communications
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ternium and Verizon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Ternium SA i.e., Ternium SA and Verizon Communications go up and down completely randomly.
Pair Corralation between Ternium SA and Verizon Communications
Assuming the 90 days horizon Ternium SA is expected to under-perform the Verizon Communications. In addition to that, Ternium SA is 1.75 times more volatile than Verizon Communications. It trades about -0.3 of its total potential returns per unit of risk. Verizon Communications is currently generating about -0.45 per unit of volatility. If you would invest 89,310 in Verizon Communications on October 4, 2024 and sell it today you would lose (8,509) from holding Verizon Communications or give up 9.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ternium SA vs. Verizon Communications
Performance |
Timeline |
Ternium SA |
Verizon Communications |
Ternium SA and Verizon Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ternium SA and Verizon Communications
The main advantage of trading using opposite Ternium SA and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.Ternium SA vs. Grupo Sports World | Ternium SA vs. First Republic Bank | Ternium SA vs. Samsung Electronics Co | Ternium SA vs. Monster Beverage Corp |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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