Correlation Between Antofagasta PLC and Southern Copper

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

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

Diversification Opportunities for Antofagasta PLC and Southern Copper

0.85

Correlation Coefficient

Antofagasta PLC  Southern Copper

Very poor diversification

The 3 months correlation between Antofagasta and Southern is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Antofagasta PLC and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Antofagasta PLC 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 Antofagasta PLC 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 Antofagasta PLC i.e., Antofagasta PLC and Southern Copper go up and down completely randomly.

Pair Corralation between Antofagasta PLC and Southern Copper

Assuming the 90 days horizon Antofagasta PLC is expected to under-perform the Southern Copper. In addition to that, Antofagasta PLC is 1.24 times more volatile than Southern Copper. It trades about -0.06 of its total potential returns per unit of risk. Southern Copper is currently generating about -0.06 per unit of volatility. If you would invest  10,476  in Southern Copper on September 21, 2024 and sell it today you would lose (1,175) from holding Southern Copper or give up 11.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Antofagasta PLC  vs.  Southern Copper

Antofagasta PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Antofagasta PLC and Southern Copper

The main advantage of trading using opposite Antofagasta PLC and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antofagasta PLC 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 Antofagasta PLC 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.