Correlation Between World Copper and Highland Copper

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

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

Diversification Opportunities for World Copper and Highland Copper

-0.01

Correlation Coefficient

World Copper  Highland Copper

Good diversification

The 3 months correlation between World and Highland is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding World Copper and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper and World 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 World Copper are associated (or correlated) with Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of World Copper i.e., World Copper and Highland Copper go up and down completely randomly.

Pair Corralation between World Copper and Highland Copper

Assuming the 90 days horizon World Copper is expected to under-perform the Highland Copper. In addition to that, World Copper is 1.36 times more volatile than Highland Copper. It trades about -0.16 of its total potential returns per unit of risk. Highland Copper is currently generating about -0.05 per unit of volatility. If you would invest  9.00  in Highland Copper on September 20, 2024 and sell it today you would lose (0.50) from holding Highland Copper or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

World Copper  vs.  Highland Copper

World Copper

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Copper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, World Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with World Copper and Highland Copper

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

The idea behind World Copper and Highland 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .