Correlation Between Southern Copper and First Quantum

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

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

Diversification Opportunities for Southern Copper and First Quantum

0.67

Correlation Coefficient

Southern Copper  First Quantum

Poor diversification

The 3 months correlation between Southern and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Southern Copper i.e., Southern Copper and First Quantum go up and down completely randomly.

Pair Corralation between Southern Copper and First Quantum

Assuming the 90 days horizon Southern Copper is expected to under-perform the First Quantum. But the stock apears to be less risky and, when comparing its historical volatility, Southern Copper is 1.68 times less risky than First Quantum. The stock trades about -0.11 of its potential returns per unit of risk. The First Quantum Minerals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,178  in First Quantum Minerals on September 5, 2024 and sell it today you would earn a total of  103.00  from holding First Quantum Minerals or generate 8.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Southern Copper  vs.  First Quantum Minerals

Southern Copper

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Southern Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Quantum Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and First Quantum

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

The idea behind Southern Copper and First Quantum Minerals 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.