Correlation Between DISTRICT METALS and Southern Copper

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Can any of the company-specific risk be diversified away by investing in both DISTRICT METALS 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 DISTRICT METALS and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DISTRICT METALS and Southern Copper, you can compare the effects of market volatilities on DISTRICT METALS 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 DISTRICT METALS with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of DISTRICT METALS and Southern Copper.

Diversification Opportunities for DISTRICT METALS and Southern Copper

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between DISTRICT and Southern is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DISTRICT METALS and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and DISTRICT METALS 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 DISTRICT METALS 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 DISTRICT METALS i.e., DISTRICT METALS and Southern Copper go up and down completely randomly.

Pair Corralation between DISTRICT METALS and Southern Copper

Assuming the 90 days trading horizon DISTRICT METALS is expected to generate 2.5 times more return on investment than Southern Copper. However, DISTRICT METALS is 2.5 times more volatile than Southern Copper. It trades about 0.08 of its potential returns per unit of risk. Southern Copper is currently generating about 0.04 per unit of risk. If you would invest  11.00  in DISTRICT METALS on September 20, 2024 and sell it today you would earn a total of  12.00  from holding DISTRICT METALS or generate 109.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DISTRICT METALS  vs.  Southern Copper

 Performance 
       Timeline  
DISTRICT METALS 

Risk-Adjusted Performance

9 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Southern Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DISTRICT METALS and Southern Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DISTRICT METALS and Southern Copper

The main advantage of trading using opposite DISTRICT METALS and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DISTRICT METALS 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 DISTRICT METALS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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