Correlation Between Ternium SA and Hudbay Minerals

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

Diversification Opportunities for Ternium SA and Hudbay Minerals

-0.14

Correlation Coefficient

Ternium SA  Hudbay Minerals

Good diversification

The 3 months correlation between Ternium and Hudbay is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Hudbay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudbay Minerals 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 Hudbay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudbay Minerals has no effect on the direction of Ternium SA i.e., Ternium SA and Hudbay Minerals go up and down completely randomly.

Pair Corralation between Ternium SA and Hudbay Minerals

Allowing for the 90-day total investment horizon Ternium SA ADR is expected to generate 0.48 times more return on investment than Hudbay Minerals. However, Ternium SA ADR is 2.09 times less risky than Hudbay Minerals. It trades about 0.1 of its potential returns per unit of risk. Hudbay Minerals is currently generating about 0.01 per unit of risk. If you would invest  2,898  in Ternium SA ADR on December 27, 2024 and sell it today you would earn a total of  275.00  from holding Ternium SA ADR or generate 9.49% return on investment over 90 days.

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

Ternium SA ADR  vs.  Hudbay Minerals

Ternium SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ternium SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hudbay Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hudbay Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Hudbay Minerals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ternium SA and Hudbay Minerals

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

The idea behind Ternium SA ADR and Hudbay Minerals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.