Correlation Between Southern Copper and Lindsell Train

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

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

Diversification Opportunities for Southern Copper and Lindsell Train

0.15

Correlation Coefficient

Southern Copper  Lindsell Train

Average diversification

The 3 months correlation between Southern and Lindsell is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment 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 Corp are associated (or correlated) with Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of Southern Copper i.e., Southern Copper and Lindsell Train go up and down completely randomly.

Pair Corralation between Southern Copper and Lindsell Train

Assuming the 90 days trading horizon Southern Copper Corp is expected to under-perform the Lindsell Train. In addition to that, Southern Copper is 1.04 times more volatile than Lindsell Train Investment. It trades about -0.15 of its total potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.15 per unit of volatility. If you would invest  72,600  in Lindsell Train Investment on September 19, 2024 and sell it today you would earn a total of  8,500  from holding Lindsell Train Investment or generate 11.71% return on investment over 90 days.

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

Southern Copper Corp  vs.  Lindsell Train Investment

Southern Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Southern Copper is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lindsell Train Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Southern Copper and Lindsell Train

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

The idea behind Southern Copper Corp and Lindsell Train Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.