Correlation Between SPDR Series and Southern Copper

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

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

Diversification Opportunities for SPDR Series and Southern Copper

0.16

Correlation Coefficient

SPDR Series  Southern Copper

Average diversification

The 3 months correlation between SPDR and Southern is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and SPDR Series 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 SPDR Series Trust 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 SPDR Series i.e., SPDR Series and Southern Copper go up and down completely randomly.

Pair Corralation between SPDR Series and Southern Copper

Assuming the 90 days trading horizon SPDR Series Trust is expected to generate 1.89 times more return on investment than Southern Copper. However, SPDR Series is 1.89 times more volatile than Southern Copper. It trades about -0.06 of its potential returns per unit of risk. Southern Copper is currently generating about -0.12 per unit of risk. If you would invest  289,205  in SPDR Series Trust on December 2, 2024 and sell it today you would lose (22,905) from holding SPDR Series Trust or give up 7.92% of portfolio value over 90 days.

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

SPDR Series Trust  vs.  Southern Copper

SPDR Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

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.

Pair Trading with SPDR Series and Southern Copper

The main advantage of trading using opposite SPDR Series and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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 SPDR Series Trust 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.