Correlation Between Southern Copper and CopperCorp Resources

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

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

Diversification Opportunities for Southern Copper and CopperCorp Resources

-0.69

Correlation Coefficient

Southern Copper  CopperCorp Resources

Excellent diversification

The 3 months correlation between Southern and CopperCorp is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and CopperCorp Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CopperCorp Resources 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 CopperCorp Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CopperCorp Resources has no effect on the direction of Southern Copper i.e., Southern Copper and CopperCorp Resources go up and down completely randomly.

Pair Corralation between Southern Copper and CopperCorp Resources

Given the investment horizon of 90 days Southern Copper is expected to under-perform the CopperCorp Resources. But the stock apears to be less risky and, when comparing its historical volatility, Southern Copper is 4.8 times less risky than CopperCorp Resources. The stock trades about -0.06 of its potential returns per unit of risk. The CopperCorp Resources is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5.60  in CopperCorp Resources on September 19, 2024 and sell it today you would earn a total of  9.40  from holding CopperCorp Resources or generate 167.86% return on investment over 90 days.

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

Southern Copper  vs.  CopperCorp Resources

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 unfluctuating 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.

CopperCorp Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CopperCorp Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CopperCorp Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and CopperCorp Resources

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

The idea behind Southern Copper and CopperCorp Resources 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.