Correlation Between Southern Copper and Glencore Plc

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

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

Diversification Opportunities for Southern Copper and Glencore Plc

0.0

Correlation Coefficient

Southern Copper  Glencore Plc

Pay attention - limited upside

The 3 months correlation between Southern and Glencore is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc 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 Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of Southern Copper i.e., Southern Copper and Glencore Plc go up and down completely randomly.

Pair Corralation between Southern Copper and Glencore Plc

Assuming the 90 days trading horizon Southern Copper is expected to generate 16.68 times more return on investment than Glencore Plc. However, Southern Copper is 16.68 times more volatile than Glencore plc. It trades about 0.11 of its potential returns per unit of risk. Glencore plc is currently generating about 0.09 per unit of risk. If you would invest  135,737  in Southern Copper on October 7, 2024 and sell it today you would earn a total of  79,263  from holding Southern Copper or generate 58.39% return on investment over 90 days.

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

Southern Copper  vs.  Glencore plc

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.

Glencore plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Glencore Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Southern Copper and Glencore Plc

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

The idea behind Southern Copper and Glencore plc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.