Correlation Between Xiaomi and Southern Copper

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

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

Diversification Opportunities for Xiaomi and Southern Copper

-0.41

Correlation Coefficient

Xiaomi  Southern Copper

Very good diversification

The 3 months correlation between Xiaomi and Southern is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Xiaomi 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 Xiaomi are associated (or correlated) with Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Xiaomi i.e., Xiaomi and Southern Copper go up and down completely randomly.

Pair Corralation between Xiaomi and Southern Copper

Assuming the 90 days trading horizon Xiaomi is expected to generate 3.76 times more return on investment than Southern Copper. However, Xiaomi is 3.76 times more volatile than Southern Copper. It trades about 0.18 of its potential returns per unit of risk. Southern Copper is currently generating about -0.08 per unit of risk. If you would invest  6,792  in Xiaomi on October 25, 2024 and sell it today you would earn a total of  2,888  from holding Xiaomi or generate 42.52% return on investment over 90 days.

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

Xiaomi  vs.  Southern Copper

Xiaomi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Xiaomi displayed solid returns over the last few months and may actually be approaching a breakup point.

Southern Copper

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xiaomi and Southern Copper

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

The idea behind Xiaomi and Southern Copper 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.