Correlation Between Ternium SA and Longvie SA

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

Diversification Opportunities for Ternium SA and Longvie SA

-0.29

Correlation Coefficient

Ternium SA  Longvie SA

Very good diversification

The 3 months correlation between Ternium and Longvie is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Longvie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longvie 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 Longvie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longvie SA has no effect on the direction of Ternium SA i.e., Ternium SA and Longvie SA go up and down completely randomly.

Pair Corralation between Ternium SA and Longvie SA

Assuming the 90 days trading horizon Ternium SA DRC is expected to under-perform the Longvie SA. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA DRC is 1.59 times less risky than Longvie SA. The stock trades about -0.12 of its potential returns per unit of risk. The Longvie SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,615  in Longvie SA on September 5, 2024 and sell it today you would earn a total of  985.00  from holding Longvie SA or generate 27.25% return on investment over 90 days.

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

Ternium SA DRC  vs.  Longvie SA

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.

Longvie SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longvie SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longvie SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ternium SA and Longvie SA

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

The idea behind Ternium SA DRC and Longvie 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.