Correlation Between Ternium SA and Grupo Financiero

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

Diversification Opportunities for Ternium SA and Grupo Financiero

-0.71

Correlation Coefficient

Ternium SA  Grupo Financiero

Pay attention - limited upside

The 3 months correlation between Ternium and Grupo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Ternium SA i.e., Ternium SA and Grupo Financiero go up and down completely randomly.

Pair Corralation between Ternium SA and Grupo Financiero

Assuming the 90 days trading horizon Ternium SA DRC is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA DRC is 1.09 times less risky than Grupo Financiero. The stock trades about -0.12 of its potential returns per unit of risk. The Grupo Financiero Galicia is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  535,000  in Grupo Financiero Galicia on September 5, 2024 and sell it today you would earn a total of  116,000  from holding Grupo Financiero Galicia or generate 21.68% return on investment over 90 days.

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

Ternium SA DRC  vs.  Grupo Financiero Galicia

Ternium SA DRC

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Grupo Financiero Galicia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Financiero sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ternium SA and Grupo Financiero

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

The idea behind Ternium SA DRC and Grupo Financiero Galicia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.