Correlation Between Ternium SA and Aperam PK

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

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

Diversification Opportunities for Ternium SA and Aperam PK

0.31

Correlation Coefficient

Ternium SA  Aperam PK

Weak diversification

The 3 months correlation between Ternium and Aperam is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Aperam PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam PK 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 ADR are associated (or correlated) with Aperam PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam PK has no effect on the direction of Ternium SA i.e., Ternium SA and Aperam PK go up and down completely randomly.

Pair Corralation between Ternium SA and Aperam PK

Allowing for the 90-day total investment horizon Ternium SA ADR is expected to under-perform the Aperam PK. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA ADR is 1.71 times less risky than Aperam PK. The stock trades about -0.39 of its potential returns per unit of risk. The Aperam PK is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,910  in Aperam PK on September 29, 2024 and sell it today you would lose (320.00) from holding Aperam PK or give up 11.0% of portfolio value over 90 days.

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

Ternium SA ADR  vs.  Aperam PK

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.

Aperam PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ternium SA and Aperam PK

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

The idea behind Ternium SA ADR and Aperam PK 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.