Correlation Between Southern Copper and Wheaton Precious

Can any of the company-specific risk be diversified away by investing in both Southern Copper and Wheaton Precious 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 Wheaton Precious 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 Wheaton Precious Metals, you can compare the effects of market volatilities on Southern Copper and Wheaton Precious 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 Wheaton Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Wheaton Precious.

Diversification Opportunities for Southern Copper and Wheaton Precious

0.26

Correlation Coefficient

Southern Copper  Wheaton Precious

Modest diversification

The 3 months correlation between Southern and Wheaton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Southern Copper i.e., Southern Copper and Wheaton Precious go up and down completely randomly.

Pair Corralation between Southern Copper and Wheaton Precious

Assuming the 90 days trading horizon Southern Copper is expected to generate 2.57 times less return on investment than Wheaton Precious. But when comparing it to its historical volatility, Southern Copper Corp is 1.06 times less risky than Wheaton Precious. It trades about 0.04 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  430,621  in Wheaton Precious Metals on September 3, 2024 and sell it today you would earn a total of  59,879  from holding Wheaton Precious Metals or generate 13.91% return on investment over 90 days.

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

Southern Copper Corp  vs.  Wheaton Precious Metals

Southern Copper Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper Corp are ranked lower than 3 (%) 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.

Wheaton Precious Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Wheaton Precious exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and Wheaton Precious

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

The idea behind Southern Copper Corp and Wheaton Precious Metals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.