Correlation Between American Copper and Compania

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

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

Diversification Opportunities for American Copper and Compania

0.27

Correlation Coefficient

American Copper  Compania

Modest diversification

The 3 months correlation between American and Compania is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Copper Development and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and American 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 American Copper Development are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of American Copper i.e., American Copper and Compania go up and down completely randomly.

Pair Corralation between American Copper and Compania

Assuming the 90 days horizon American Copper Development is expected to generate 63.51 times more return on investment than Compania. However, American Copper is 63.51 times more volatile than Compania de Minas. It trades about 0.12 of its potential returns per unit of risk. Compania de Minas is currently generating about 0.22 per unit of risk. If you would invest  15.00  in American Copper Development on December 29, 2024 and sell it today you would lose (5.00) from holding American Copper Development or give up 33.33% of portfolio value over 90 days.

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

American Copper Development  vs.  Compania de Minas

American Copper Deve

Risk-Adjusted Performance

OK

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

Compania de Minas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Compania displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Copper and Compania

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

The idea behind American Copper Development and Compania de Minas 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.