Correlation Between Ternium SA and Usinas Siderurgicas

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

Diversification Opportunities for Ternium SA and Usinas Siderurgicas

0.64

Correlation Coefficient

Ternium SA  Usinas Siderurgicas

Poor diversification

The 3 months correlation between Ternium and Usinas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Usinas Siderurgicas de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usinas Siderurgicas 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 Usinas Siderurgicas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usinas Siderurgicas has no effect on the direction of Ternium SA i.e., Ternium SA and Usinas Siderurgicas go up and down completely randomly.

Pair Corralation between Ternium SA and Usinas Siderurgicas

Allowing for the 90-day total investment horizon Ternium SA is expected to generate 1.86 times less return on investment than Usinas Siderurgicas. But when comparing it to its historical volatility, Ternium SA ADR is 2.47 times less risky than Usinas Siderurgicas. It trades about 0.08 of its potential returns per unit of risk. Usinas Siderurgicas de is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Usinas Siderurgicas de on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Usinas Siderurgicas de or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Ternium SA ADR  vs.  Usinas Siderurgicas de

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 6 (%) 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.

Usinas Siderurgicas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Usinas Siderurgicas de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Usinas Siderurgicas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ternium SA and Usinas Siderurgicas

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

The idea behind Ternium SA ADR and Usinas Siderurgicas de 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.