Correlation Between Ternium SA and Molinos Agro

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

Diversification Opportunities for Ternium SA and Molinos Agro

-0.26

Correlation Coefficient

Ternium SA  Molinos Agro

Very good diversification

The 3 months correlation between Ternium and Molinos is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Molinos Agro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molinos Agro 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 Molinos Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molinos Agro SA has no effect on the direction of Ternium SA i.e., Ternium SA and Molinos Agro go up and down completely randomly.

Pair Corralation between Ternium SA and Molinos Agro

Assuming the 90 days trading horizon Ternium SA DRC is expected to under-perform the Molinos Agro. But the stock apears to be less risky and, when comparing its historical volatility, Ternium SA DRC is 2.81 times less risky than Molinos Agro. The stock trades about -0.03 of its potential returns per unit of risk. The Molinos Agro SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,245,000  in Molinos Agro SA on December 2, 2024 and sell it today you would earn a total of  20,000  from holding Molinos Agro SA or generate 0.89% 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.  Molinos Agro 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.

Molinos Agro SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molinos Agro SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Molinos Agro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ternium SA and Molinos Agro

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

The idea behind Ternium SA DRC and Molinos Agro 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.