Correlation Between Microsoft and Southern Copper

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

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

Diversification Opportunities for Microsoft and Southern Copper

0.49

Correlation Coefficient

Microsoft  Southern Copper

Very weak diversification

The 3 months correlation between Microsoft and Southern is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Southern Copper go up and down completely randomly.

Pair Corralation between Microsoft and Southern Copper

Given the investment horizon of 90 days Microsoft is expected to under-perform the Southern Copper. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.23 times less risky than Southern Copper. The stock trades about -0.15 of its potential returns per unit of risk. The Southern Copper is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  9,695  in Southern Copper on December 10, 2024 and sell it today you would lose (1,339) from holding Southern Copper or give up 13.81% of portfolio value over 90 days.

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

Microsoft  vs.  Southern Copper

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Southern Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Southern Copper

The main advantage of trading using opposite Microsoft and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.