Correlation Between Southern Copper and Arca Continental

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

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

Diversification Opportunities for Southern Copper and Arca Continental

-0.89

Correlation Coefficient

Southern Copper  Arca Continental

Pay attention - limited upside

The 3 months correlation between Southern and Arca is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Southern Copper i.e., Southern Copper and Arca Continental go up and down completely randomly.

Pair Corralation between Southern Copper and Arca Continental

Assuming the 90 days trading horizon Southern Copper is expected to generate 2.16 times more return on investment than Arca Continental. However, Southern Copper is 2.16 times more volatile than Arca Continental SAB. It trades about 0.25 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.13 per unit of risk. If you would invest  133,610  in Southern Copper on February 19, 2024 and sell it today you would earn a total of  69,390  from holding Southern Copper or generate 51.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Southern Copper  vs.  Arca Continental SAB

Southern Copper

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southern Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary 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 Southern Copper and Arca Continental

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

The idea behind Southern Copper and Arca Continental SAB 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.