Correlation Between Universal Stainless and Ternium SA

Can any of the company-specific risk be diversified away by investing in both Universal Stainless and Ternium 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 Universal Stainless and Ternium SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Universal Stainless Alloy and Ternium SA ADR, you can compare the effects of market volatilities on Universal Stainless and Ternium 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 Universal Stainless with a short position of Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Ternium SA.

Diversification Opportunities for Universal Stainless and Ternium SA

0.17

Correlation Coefficient

Universal Stainless  Ternium SA

Average diversification

The 3 months correlation between Universal and Ternium is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Ternium SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA ADR and Universal Stainless 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 Universal Stainless Alloy are associated (or correlated) with Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA ADR has no effect on the direction of Universal Stainless i.e., Universal Stainless and Ternium SA go up and down completely randomly.

Pair Corralation between Universal Stainless and Ternium SA

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 1.92 times more return on investment than Ternium SA. However, Universal Stainless is 1.92 times more volatile than Ternium SA ADR. It trades about 0.1 of its potential returns per unit of risk. Ternium SA ADR is currently generating about -0.06 per unit of risk. If you would invest  2,974  in Universal Stainless Alloy on September 3, 2024 and sell it today you would earn a total of  1,468  from holding Universal Stainless Alloy or generate 49.36% return on investment over 90 days.

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

Universal Stainless Alloy  vs.  Ternium SA ADR

Universal Stainless Alloy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless reported solid returns over the last few months and may actually be approaching a breakup point.

Ternium SA ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Pair Trading with Universal Stainless and Ternium SA

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

The idea behind Universal Stainless Alloy and Ternium SA ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.