Correlation Between Ternium SA and Salzgitter

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

Diversification Opportunities for Ternium SA and Salzgitter

0.19

Correlation Coefficient

Ternium SA  Salzgitter

Average diversification

The 3 months correlation between Ternium and Salzgitter is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Salzgitter AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzgitter AG ADR 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 Salzgitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzgitter AG ADR has no effect on the direction of Ternium SA i.e., Ternium SA and Salzgitter go up and down completely randomly.

Pair Corralation between Ternium SA and Salzgitter

Allowing for the 90-day total investment horizon Ternium SA ADR is expected to under-perform the Salzgitter. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA ADR is 1.37 times less risky than Salzgitter. The stock trades about -0.39 of its potential returns per unit of risk. The Salzgitter AG ADR is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Salzgitter AG ADR on September 29, 2024 and sell it today you would lose (19.00) from holding Salzgitter AG ADR or give up 10.73% of portfolio value over 90 days.

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

Ternium SA ADR  vs.  Salzgitter AG ADR

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.

Salzgitter AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salzgitter AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Salzgitter is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ternium SA and Salzgitter

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

The idea behind Ternium SA ADR and Salzgitter AG ADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..