Correlation Between Ternium SA and Capex SA

Can any of the company-specific risk be diversified away by investing in both Ternium SA and Capex SA 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 Capex SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ternium SA DRC and Capex SA, you can compare the effects of market volatilities on Ternium SA and Capex SA 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 Capex SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ternium SA and Capex SA.

Diversification Opportunities for Ternium SA and Capex SA

-0.51

Correlation Coefficient

Ternium SA  Capex SA

Excellent diversification

The 3 months correlation between Ternium and Capex is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Capex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capex SA 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 DRC are associated (or correlated) with Capex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capex SA has no effect on the direction of Ternium SA i.e., Ternium SA and Capex SA go up and down completely randomly.

Pair Corralation between Ternium SA and Capex SA

Assuming the 90 days trading horizon Ternium SA DRC is expected to generate 0.45 times more return on investment than Capex SA. However, Ternium SA DRC is 2.2 times less risky than Capex SA. It trades about -0.03 of its potential returns per unit of risk. Capex SA is currently generating about -0.14 per unit of risk. If you would invest  914,000  in Ternium SA DRC on December 2, 2024 and sell it today you would lose (36,000) from holding Ternium SA DRC or give up 3.94% of portfolio value over 90 days.

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

Ternium SA DRC  vs.  Capex SA

Ternium SA DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ternium SA DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ternium SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capex SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capex SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ternium SA and Capex SA

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

The idea behind Ternium SA DRC and Capex SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.