Correlation Between Usinas Siderurgicas and Ternium SA

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

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

Diversification Opportunities for Usinas Siderurgicas and Ternium SA

0.51

Correlation Coefficient

Usinas Siderurgicas  Ternium SA

Very weak diversification

The 3 months correlation between Usinas and Ternium is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Usinas Siderurgicas de 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 Usinas Siderurgicas 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 Usinas Siderurgicas de 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 Usinas Siderurgicas i.e., Usinas Siderurgicas and Ternium SA go up and down completely randomly.

Pair Corralation between Usinas Siderurgicas and Ternium SA

Assuming the 90 days horizon Usinas Siderurgicas is expected to generate 9.35 times less return on investment than Ternium SA. In addition to that, Usinas Siderurgicas is 2.33 times more volatile than Ternium SA ADR. It trades about 0.0 of its total potential returns per unit of risk. Ternium SA ADR is currently generating about 0.05 per unit of volatility. If you would invest  3,169  in Ternium SA ADR on September 3, 2024 and sell it today you would earn a total of  148.00  from holding Ternium SA ADR or generate 4.67% return on investment over 90 days.

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

Usinas Siderurgicas de  vs.  Ternium SA ADR

Usinas Siderurgicas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Usinas Siderurgicas de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Usinas Siderurgicas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Usinas Siderurgicas and Ternium SA

The main advantage of trading using opposite Usinas Siderurgicas and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Usinas Siderurgicas 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 Usinas Siderurgicas de 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 Transaction History module to view history of all your transactions and understand their impact on performance.