Correlation Between Ternium SA and Hawkins

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

Diversification Opportunities for Ternium SA and Hawkins

-0.01

Correlation Coefficient

Ternium SA  Hawkins

Good diversification

The 3 months correlation between Ternium and Hawkins is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Ternium SA i.e., Ternium SA and Hawkins go up and down completely randomly.

Pair Corralation between Ternium SA and Hawkins

Allowing for the 90-day total investment horizon Ternium SA ADR is expected to generate 0.64 times more return on investment than Hawkins. However, Ternium SA ADR is 1.57 times less risky than Hawkins. It trades about -0.26 of its potential returns per unit of risk. Hawkins is currently generating about -0.24 per unit of risk. If you would invest  3,202  in Ternium SA ADR on October 4, 2024 and sell it today you would lose (273.00) from holding Ternium SA ADR or give up 8.53% of portfolio value over 90 days.

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

Ternium SA ADR  vs.  Hawkins

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.

Hawkins

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawkins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Hawkins 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 Hawkins

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

The idea behind Ternium SA ADR and Hawkins 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.