Correlation Between Arizona Sonoran and Southern Copper

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

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

Diversification Opportunities for Arizona Sonoran and Southern Copper

0.58

Correlation Coefficient

Arizona Sonoran  Southern Copper

Very weak diversification

The 3 months correlation between Arizona and Southern is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Arizona Sonoran 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 Arizona Sonoran Copper 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 Arizona Sonoran i.e., Arizona Sonoran and Southern Copper go up and down completely randomly.

Pair Corralation between Arizona Sonoran and Southern Copper

Assuming the 90 days horizon Arizona Sonoran Copper is expected to under-perform the Southern Copper. In addition to that, Arizona Sonoran is 1.67 times more volatile than Southern Copper. It trades about -0.01 of its total potential returns per unit of risk. Southern Copper is currently generating about 0.03 per unit of volatility. If you would invest  8,438  in Southern Copper on September 20, 2024 and sell it today you would earn a total of  858.00  from holding Southern Copper or generate 10.17% return on investment over 90 days.

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

Arizona Sonoran Copper  vs.  Southern Copper

Arizona Sonoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arizona Sonoran Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing 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 Arizona Sonoran and Southern Copper

The main advantage of trading using opposite Arizona Sonoran and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arizona Sonoran 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 Arizona Sonoran Copper 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.