Correlation Between Ternium SA and Pfizer

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

Diversification Opportunities for Ternium SA and Pfizer

0.69

Correlation Coefficient

Ternium SA  Pfizer

Poor diversification

The 3 months correlation between Ternium and Pfizer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Ternium SA i.e., Ternium SA and Pfizer go up and down completely randomly.

Pair Corralation between Ternium SA and Pfizer

Assuming the 90 days trading horizon Ternium SA DRC is expected to generate 1.39 times more return on investment than Pfizer. However, Ternium SA is 1.39 times more volatile than Pfizer Inc. It trades about 0.17 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.05 per unit of risk. If you would invest  860,000  in Ternium SA DRC on December 27, 2024 and sell it today you would earn a total of  167,500  from holding Ternium SA DRC or generate 19.48% return on investment over 90 days.

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

Ternium SA DRC  vs.  Pfizer Inc

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 13 (%) 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.

Pfizer Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ternium SA and Pfizer

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

The idea behind Ternium SA DRC and Pfizer Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.