Correlation Between Southern Copper and Corporacion Aceros

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

By analyzing existing cross correlation between Southern Copper Corp and Corporacion Aceros Arequipa, you can compare the effects of market volatilities on Southern Copper and Corporacion Aceros 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 Corporacion Aceros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Corporacion Aceros.

Diversification Opportunities for Southern Copper and Corporacion Aceros

0.26

Correlation Coefficient

Southern Copper  Corporacion Aceros

Modest diversification

The 3 months correlation between Southern and Corporacion is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Corporacion Aceros Arequipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion Aceros 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 Corp are associated (or correlated) with Corporacion Aceros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion Aceros has no effect on the direction of Southern Copper i.e., Southern Copper and Corporacion Aceros go up and down completely randomly.

Pair Corralation between Southern Copper and Corporacion Aceros

Assuming the 90 days trading horizon Southern Copper Corp is expected to generate 1.35 times more return on investment than Corporacion Aceros. However, Southern Copper is 1.35 times more volatile than Corporacion Aceros Arequipa. It trades about 0.04 of its potential returns per unit of risk. Corporacion Aceros Arequipa is currently generating about -0.02 per unit of risk. If you would invest  7,418  in Southern Copper Corp on October 27, 2024 and sell it today you would earn a total of  2,312  from holding Southern Copper Corp or generate 31.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.53%
Values	Daily Returns

Southern Copper Corp  vs.  Corporacion Aceros Arequipa

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. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Corporacion Aceros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporacion Aceros Arequipa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Corporacion Aceros is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Southern Copper and Corporacion Aceros

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

The idea behind Southern Copper Corp and Corporacion Aceros Arequipa 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.