Correlation Between Central Asia and Southern Copper

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

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

Diversification Opportunities for Central Asia and Southern Copper

0.74

Correlation Coefficient

Central Asia  Southern Copper

Poor diversification

The 3 months correlation between Central and Southern is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper Corp and Central Asia 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 Central Asia Metals 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 Corp has no effect on the direction of Central Asia i.e., Central Asia and Southern Copper go up and down completely randomly.

Pair Corralation between Central Asia and Southern Copper

Assuming the 90 days trading horizon Central Asia Metals is expected to generate 0.65 times more return on investment than Southern Copper. However, Central Asia Metals is 1.54 times less risky than Southern Copper. It trades about 0.07 of its potential returns per unit of risk. Southern Copper Corp is currently generating about 0.01 per unit of risk. If you would invest  16,000  in Central Asia Metals on September 14, 2024 and sell it today you would earn a total of  280.00  from holding Central Asia Metals or generate 1.75% return on investment over 90 days.

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

Central Asia Metals  vs.  Southern Copper Corp

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Southern Copper Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Central Asia and Southern Copper

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

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.