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

-0.69

Correlation Coefficient

Ternium SA  Molinos Agro

Excellent diversification

The 3 months correlation between Ternium and Molinos is -0.69. 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 generate 0.46 times more return on investment than Molinos Agro. However, Ternium SA DRC is 2.15 times less risky than Molinos Agro. It trades about 0.16 of its potential returns per unit of risk. Molinos Agro SA is currently generating about -0.1 per unit of risk. If you would invest  852,000  in Ternium SA DRC on December 30, 2024 and sell it today you would earn a total of  160,500  from holding Ternium SA DRC or generate 18.84% 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.  Molinos Agro SA

Ternium SA DRC

Risk-Adjusted Performance

Good

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

Molinos Agro SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molinos Agro 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 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.