Correlation Between China Hongqiao and Ternium SA

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

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

Diversification Opportunities for China Hongqiao and Ternium SA

0.83

Correlation Coefficient

China Hongqiao  Ternium SA

Very poor diversification

The 3 months correlation between China and Ternium is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group 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 China Hongqiao 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 China Hongqiao Group 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 China Hongqiao i.e., China Hongqiao and Ternium SA go up and down completely randomly.

Pair Corralation between China Hongqiao and Ternium SA

If you would invest  4,168  in Ternium SA ADR on January 31, 2024 and sell it today you would earn a total of  142.00  from holding Ternium SA ADR or generate 3.41% return on investment over 90 days.

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

China Hongqiao Group  vs.  Ternium SA ADR

China Hongqiao Group

Risk-Adjusted Performance

9 of 100

OK

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

Ternium SA ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ternium SA may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with China Hongqiao and Ternium SA

The main advantage of trading using opposite China Hongqiao and Ternium SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao 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 China Hongqiao Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.