Correlation Between First and Southern Copper

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

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

Diversification Opportunities for First and Southern Copper

0.03

Correlation Coefficient

First  Southern Copper

Significant diversification

The 3 months correlation between First and Southern is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals 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 First 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 First Class 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 Corp has no effect on the direction of First i.e., First and Southern Copper go up and down completely randomly.

Pair Corralation between First and Southern Copper

Assuming the 90 days trading horizon First Class Metals is expected to generate 2.45 times more return on investment than Southern Copper. However, First is 2.45 times more volatile than Southern Copper Corp. It trades about -0.02 of its potential returns per unit of risk. Southern Copper Corp is currently generating about -0.21 per unit of risk. If you would invest  195.00  in First Class Metals on October 7, 2024 and sell it today you would lose (15.00) from holding First Class Metals or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

First Class Metals  vs.  Southern Copper Corp

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with First and Southern Copper

The main advantage of trading using opposite First and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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 First Class Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.