Correlation Between Vanguard World and Southern Copper

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

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

Diversification Opportunities for Vanguard World and Southern Copper

0.14

Correlation Coefficient

Vanguard World  Southern Copper

Average diversification

The 3 months correlation between Vanguard and Southern is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Vanguard World 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 Vanguard World are associated (or correlated) with Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Vanguard World i.e., Vanguard World and Southern Copper go up and down completely randomly.

Pair Corralation between Vanguard World and Southern Copper

Assuming the 90 days trading horizon Vanguard World is expected to generate 3.07 times less return on investment than Southern Copper. But when comparing it to its historical volatility, Vanguard World is 2.15 times less risky than Southern Copper. It trades about 0.04 of its potential returns per unit of risk. Southern Copper is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  130,622  in Southern Copper on October 5, 2024 and sell it today you would earn a total of  84,378  from holding Southern Copper or generate 64.6% return on investment over 90 days.

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

Vanguard World  vs.  Southern Copper

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Vanguard World and Southern Copper

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

The idea behind Vanguard World and Southern Copper 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.