Correlation Between Southern Copper and American Express

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

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

Diversification Opportunities for Southern Copper and American Express

0.31

Correlation Coefficient

Southern Copper  American Express

Weak diversification

The 3 months correlation between Southern and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Southern Copper i.e., Southern Copper and American Express go up and down completely randomly.

Pair Corralation between Southern Copper and American Express

Assuming the 90 days trading horizon Southern Copper is expected to under-perform the American Express. In addition to that, Southern Copper is 1.34 times more volatile than American Express. It trades about -0.28 of its total potential returns per unit of risk. American Express is currently generating about -0.21 per unit of volatility. If you would invest  651,103  in American Express on December 4, 2024 and sell it today you would lose (37,720) from holding American Express or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Southern Copper  vs.  American Express

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. 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.

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, American Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southern Copper and American Express

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

The idea behind Southern Copper and American Express 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.