Correlation Between Southern Copper and DISTRICT METALS

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

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

Diversification Opportunities for Southern Copper and DISTRICT METALS

0.51

Correlation Coefficient

Southern Copper  DISTRICT METALS

Very weak diversification

The 3 months correlation between Southern and DISTRICT is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS and Southern Copper 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 Southern Copper are associated (or correlated) with DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of Southern Copper i.e., Southern Copper and DISTRICT METALS go up and down completely randomly.

Pair Corralation between Southern Copper and DISTRICT METALS

Assuming the 90 days horizon Southern Copper is expected to generate 0.51 times more return on investment than DISTRICT METALS. However, Southern Copper is 1.98 times less risky than DISTRICT METALS. It trades about -0.12 of its potential returns per unit of risk. DISTRICT METALS is currently generating about -0.13 per unit of risk. If you would invest  10,172  in Southern Copper on September 22, 2024 and sell it today you would lose (1,268) from holding Southern Copper or give up 12.47% of portfolio value over 90 days.

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

Southern Copper  vs.  DISTRICT METALS

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. Despite nearly stable basic indicators, Southern Copper is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

DISTRICT METALS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DISTRICT METALS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DISTRICT METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and DISTRICT METALS

The main advantage of trading using opposite Southern Copper and DISTRICT METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, DISTRICT METALS 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 DISTRICT METALS will offset losses from the drop in DISTRICT METALS's long position.

The idea behind Southern Copper and DISTRICT METALS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.