Correlation Between Ternium SA and Aperam SA

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

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

Diversification Opportunities for Ternium SA and Aperam SA

-0.51

Correlation Coefficient

Ternium SA  Aperam SA

Excellent diversification

The 3 months correlation between Ternium and Aperam is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA ADR and Aperam SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam 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 ADR are associated (or correlated) with Aperam SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam SA has no effect on the direction of Ternium SA i.e., Ternium SA and Aperam SA go up and down completely randomly.

Pair Corralation between Ternium SA and Aperam SA

If you would invest  4,065  in Ternium SA ADR on January 19, 2024 and sell it today you would earn a total of  227.00  from holding Ternium SA ADR or generate 5.58% return on investment over 90 days.

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

Ternium SA ADR  vs.  Aperam SA

Ternium SA ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ternium SA ADR are ranked lower than 7 (%) 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.

Aperam SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aperam SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ternium SA and Aperam SA

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

The idea behind Ternium SA ADR and Aperam 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.