Correlation Between Southern Copper and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Southern Copper and Alcoa Corp 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 Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Copper and Alcoa Corp, you can compare the effects of market volatilities on Southern Copper and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Alcoa Corp.
Diversification Opportunities for Southern Copper and Alcoa Corp
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southern and Alcoa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Southern Copper i.e., Southern Copper and Alcoa Corp go up and down completely randomly.
Pair Corralation between Southern Copper and Alcoa Corp
Given the investment horizon of 90 days Southern Copper is expected to generate 1.86 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Southern Copper is 1.5 times less risky than Alcoa Corp. It trades about 0.23 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,186 in Alcoa Corp on January 23, 2024 and sell it today you would earn a total of 449.00 from holding Alcoa Corp or generate 14.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Copper vs. Alcoa Corp
Performance |
| Timeline |
| Southern Copper |
| Alcoa Corp |
Southern Copper and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Copper and Alcoa Corp
The main advantage of trading using opposite Southern Copper and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.The idea behind Southern Copper and Alcoa Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |