Correlation Between ENGIE Energia and Southern Copper

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

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

Diversification Opportunities for ENGIE Energia and Southern Copper

0.04

Correlation Coefficient

ENGIE Energia  Southern Copper

Significant diversification

The 3 months correlation between ENGIE and Southern is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ENGIE Energia Peru and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper Corp and ENGIE Energia 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 ENGIE Energia Peru 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 Corp has no effect on the direction of ENGIE Energia i.e., ENGIE Energia and Southern Copper go up and down completely randomly.

Pair Corralation between ENGIE Energia and Southern Copper

Assuming the 90 days trading horizon ENGIE Energia Peru is expected to under-perform the Southern Copper. But the stock apears to be less risky and, when comparing its historical volatility, ENGIE Energia Peru is 2.16 times less risky than Southern Copper. The stock trades about -0.19 of its potential returns per unit of risk. The Southern Copper Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,410  in Southern Copper Corp on October 27, 2024 and sell it today you would earn a total of  320.00  from holding Southern Copper Corp or generate 3.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

ENGIE Energia Peru  vs.  Southern Copper Corp

ENGIE Energia Peru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE Energia Peru has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, ENGIE Energia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Southern Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ENGIE Energia and Southern Copper

The main advantage of trading using opposite ENGIE Energia and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENGIE Energia 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 ENGIE Energia Peru and Southern Copper Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.