Correlation Between Ternium SA and Codexis

Can any of the company-specific risk be diversified away by investing in both Ternium SA and Codexis 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 Codexis 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 Codexis, you can compare the effects of market volatilities on Ternium SA and Codexis 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 Codexis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Codexis.

Diversification Opportunities for Ternium SA and Codexis

-0.77

Correlation Coefficient

Ternium SA  Codexis

Pay attention - limited upside

The 3 months correlation between Ternium and Codexis is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Ternium SA i.e., Ternium SA and Codexis go up and down completely randomly.

Pair Corralation between Ternium SA and Codexis

Allowing for the 90-day total investment horizon Ternium SA is expected to generate 18.5 times less return on investment than Codexis. But when comparing it to its historical volatility, Ternium SA ADR is 3.1 times less risky than Codexis. It trades about 0.0 of its potential returns per unit of risk. Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Codexis on October 5, 2024 and sell it today you would lose (107.00) from holding Codexis or give up 17.63% of portfolio value over 90 days.

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

Ternium SA ADR  vs.  Codexis

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

Codexis

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ternium SA and Codexis

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

The idea behind Ternium SA ADR and Codexis 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.