Correlation Between Bell Copper and Southern Copper

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

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

Diversification Opportunities for Bell Copper and Southern Copper

0.43

Correlation Coefficient

Bell Copper  Southern Copper

Very weak diversification

The 3 months correlation between Bell and Southern is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bell Copper and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Bell 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 Bell 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 Bell Copper i.e., Bell Copper and Southern Copper go up and down completely randomly.

Pair Corralation between Bell Copper and Southern Copper

Assuming the 90 days horizon Bell Copper is expected to generate 7.55 times more return on investment than Southern Copper. However, Bell Copper is 7.55 times more volatile than Southern Copper. It trades about 0.03 of its potential returns per unit of risk. Southern Copper is currently generating about -0.24 per unit of risk. If you would invest  3.00  in Bell Copper on September 20, 2024 and sell it today you would lose (0.50) from holding Bell Copper or give up 16.67% of portfolio value over 90 days.

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

Bell Copper  vs.  Southern Copper

Bell Copper

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bell Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Bell Copper reported 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 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 Bell Copper and Southern Copper

The main advantage of trading using opposite Bell Copper and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bell Copper 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 Bell 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.