Correlation Between Southern Copper and Lennar

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

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

Diversification Opportunities for Southern Copper and Lennar

0.66

Correlation Coefficient

Southern Copper  Lennar

Poor diversification

The 3 months correlation between Southern and Lennar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Southern Copper i.e., Southern Copper and Lennar go up and down completely randomly.

Pair Corralation between Southern Copper and Lennar

Assuming the 90 days trading horizon Southern Copper is expected to generate 0.48 times more return on investment than Lennar. However, Southern Copper is 2.1 times less risky than Lennar. It trades about -0.16 of its potential returns per unit of risk. Lennar is currently generating about -0.23 per unit of risk. If you would invest  212,001  in Southern Copper on December 22, 2024 and sell it today you would lose (21,001) from holding Southern Copper or give up 9.91% of portfolio value over 90 days.

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

Southern Copper  vs.  Lennar

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.

Lennar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Southern Copper and Lennar

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

The idea behind Southern Copper and Lennar 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.