Correlation Between Ternium SA and Southern Copper

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

Diversification Opportunities for Ternium SA and Southern Copper

0.88

Correlation Coefficient

Ternium SA  Southern Copper

Very poor diversification

The 3 months correlation between Ternium and Southern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Ternium SA i.e., Ternium SA and Southern Copper go up and down completely randomly.

Pair Corralation between Ternium SA and Southern Copper

Allowing for the 90-day total investment horizon Ternium SA is expected to generate 14.34 times less return on investment than Southern Copper. But when comparing it to its historical volatility, Ternium SA ADR is 1.26 times less risky than Southern Copper. It trades about 0.0 of its potential returns per unit of risk. Southern Copper is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,919  in Southern Copper on October 5, 2024 and sell it today you would earn a total of  2,297  from holding Southern Copper or generate 33.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Ternium SA ADR  vs.  Southern Copper

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.

Southern Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ternium SA and Southern Copper

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

The idea behind Ternium SA ADR and Southern Copper 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.