Correlation Between Southern Copper and CarMax

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

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

Diversification Opportunities for Southern Copper and CarMax

-0.38

Correlation Coefficient

Southern Copper  CarMax

Very good diversification

The 3 months correlation between Southern and CarMax is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Southern Copper i.e., Southern Copper and CarMax go up and down completely randomly.

Pair Corralation between Southern Copper and CarMax

Assuming the 90 days trading horizon Southern Copper is expected to generate 1.07 times more return on investment than CarMax. However, Southern Copper is 1.07 times more volatile than CarMax Inc. It trades about 0.06 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.04 per unit of risk. If you would invest  128,923  in Southern Copper on October 10, 2024 and sell it today you would earn a total of  86,077  from holding Southern Copper or generate 66.77% return on investment over 90 days.

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

Southern Copper  vs.  CarMax Inc

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.

CarMax Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CarMax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and CarMax

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

The idea behind Southern Copper and CarMax Inc 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.