Correlation Between Metals Exploration and Southern Copper

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

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

Diversification Opportunities for Metals Exploration and Southern Copper

0.01

Correlation Coefficient

Metals Exploration  Southern Copper

Significant diversification

The 3 months correlation between Metals and Southern is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc 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 Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Southern Copper go up and down completely randomly.

Pair Corralation between Metals Exploration and Southern Copper

Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.37 times more return on investment than Southern Copper. However, Metals Exploration is 1.37 times more volatile than Southern Copper Corp. It trades about -0.11 of its potential returns per unit of risk. Southern Copper Corp is currently generating about -0.16 per unit of risk. If you would invest  575.00  in Metals Exploration Plc on September 23, 2024 and sell it today you would lose (45.00) from holding Metals Exploration Plc or give up 7.83% of portfolio value over 90 days.

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

Metals Exploration Plc  vs.  Southern Copper Corp

Metals Exploration Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest uncertain 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.

Pair Trading with Metals Exploration and Southern Copper

The main advantage of trading using opposite Metals Exploration and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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 Metals Exploration Plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.