Correlation Between Southern Copper and Herald Investment

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

By analyzing existing cross correlation between Southern Copper Corp and Herald Investment Trust, you can compare the effects of market volatilities on Southern Copper and Herald Investment 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 Southern Copper with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Herald Investment.

Diversification Opportunities for Southern Copper and Herald Investment

-0.6

Correlation Coefficient

Southern Copper  Herald Investment

Excellent diversification

The 3 months correlation between Southern and Herald is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust and Southern Copper 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 Southern Copper Corp are associated (or correlated) with Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Southern Copper i.e., Southern Copper and Herald Investment go up and down completely randomly.

Pair Corralation between Southern Copper and Herald Investment

Assuming the 90 days trading horizon Southern Copper is expected to generate 5.32 times less return on investment than Herald Investment. In addition to that, Southern Copper is 2.65 times more volatile than Herald Investment Trust. It trades about 0.02 of its total potential returns per unit of risk. Herald Investment Trust is currently generating about 0.32 per unit of volatility. If you would invest  207,500  in Herald Investment Trust on September 17, 2024 and sell it today you would earn a total of  42,000  from holding Herald Investment Trust or generate 20.24% return on investment over 90 days.

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

Southern Copper Corp  vs.  Herald Investment Trust

Southern Copper Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Southern Copper is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Herald Investment Trust

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Herald Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and Herald Investment

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

The idea behind Southern Copper Corp and Herald Investment Trust 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.