Correlation Between Lennar and Southern Copper

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

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

Diversification Opportunities for Lennar and Southern Copper

0.11

Correlation Coefficient

Lennar  Southern Copper

Average diversification

The 3 months correlation between Lennar and Southern is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Lennar 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 Lennar 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 Lennar i.e., Lennar and Southern Copper go up and down completely randomly.

Pair Corralation between Lennar and Southern Copper

If you would invest  215,000  in Southern Copper on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Southern Copper or generate 0.0% return on investment over 90 days.

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

Lennar  vs.  Southern Copper

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 fairly strong basic indicators, Southern Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lennar and Southern Copper

The main advantage of trading using opposite Lennar and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar 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 Lennar 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.