Correlation Between Hongli Group and Southern Copper

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

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

Diversification Opportunities for Hongli Group and Southern Copper

0.09

Correlation Coefficient

Hongli Group  Southern Copper

Significant diversification

The 3 months correlation between Hongli and Southern is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hongli Group Ordinary and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Hongli Group 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 Hongli Group Ordinary 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 Hongli Group i.e., Hongli Group and Southern Copper go up and down completely randomly.

Pair Corralation between Hongli Group and Southern Copper

Considering the 90-day investment horizon Hongli Group Ordinary is expected to under-perform the Southern Copper. In addition to that, Hongli Group is 1.83 times more volatile than Southern Copper. It trades about -0.02 of its total potential returns per unit of risk. Southern Copper is currently generating about 0.05 per unit of volatility. If you would invest  9,013  in Southern Copper on December 29, 2024 and sell it today you would earn a total of  401.00  from holding Southern Copper or generate 4.45% return on investment over 90 days.

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

Hongli Group Ordinary  vs.  Southern Copper

Hongli Group Ordinary

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Hongli Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Southern Copper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Southern Copper is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hongli Group and Southern Copper

The main advantage of trading using opposite Hongli Group and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongli Group 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 Hongli Group Ordinary 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.