Correlation Between Southern Copper and Antofagasta PLC

Can any of the company-specific risk be diversified away by investing in both Southern Copper and Antofagasta 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 Antofagasta 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 Antofagasta PLC, you can compare the effects of market volatilities on Southern Copper and Antofagasta 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 Antofagasta PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Antofagasta PLC.

Diversification Opportunities for Southern Copper and Antofagasta PLC

0.8

Correlation Coefficient

Southern Copper  Antofagasta PLC

Very poor diversification

The 3 months correlation between Southern and Antofagasta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Antofagasta PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta 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 Antofagasta PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta PLC has no effect on the direction of Southern Copper i.e., Southern Copper and Antofagasta PLC go up and down completely randomly.

Pair Corralation between Southern Copper and Antofagasta PLC

Given the investment horizon of 90 days Southern Copper is expected to generate 0.81 times more return on investment than Antofagasta PLC. However, Southern Copper is 1.24 times less risky than Antofagasta PLC. It trades about -0.06 of its potential returns per unit of risk. Antofagasta PLC is currently generating about -0.06 per unit of risk. If you would invest  10,476  in Southern Copper on September 21, 2024 and sell it today you would lose (1,175) from holding Southern Copper or give up 11.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Southern Copper  vs.  Antofagasta 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 latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Antofagasta PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Southern Copper and Antofagasta PLC

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

The idea behind Southern Copper and Antofagasta 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.