Correlation Between Southern Copper and Optima Health

Can any of the company-specific risk be diversified away by investing in both Southern Copper and Optima Health 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 Optima Health 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 Optima Health plc, you can compare the effects of market volatilities on Southern Copper and Optima Health 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 Optima Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Optima Health.

Diversification Opportunities for Southern Copper and Optima Health

-0.12

Correlation Coefficient

Southern Copper  Optima Health

Good diversification

The 3 months correlation between Southern and Optima is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Health plc 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 Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Southern Copper i.e., Southern Copper and Optima Health go up and down completely randomly.

Pair Corralation between Southern Copper and Optima Health

Assuming the 90 days trading horizon Southern Copper Corp is expected to under-perform the Optima Health. In addition to that, Southern Copper is 1.88 times more volatile than Optima Health plc. It trades about -0.03 of its total potential returns per unit of risk. Optima Health plc is currently generating about -0.03 per unit of volatility. If you would invest  15,100  in Optima Health plc on September 20, 2024 and sell it today you would lose (400.00) from holding Optima Health plc or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Southern Copper Corp  vs.  Optima Health plc

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Optima Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Health plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Optima Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Southern Copper and Optima Health

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

The idea behind Southern Copper Corp and Optima Health plc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.