Correlation Between Southern Copper and Capital Drilling

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

Diversification Opportunities for Southern Copper and Capital Drilling

0.76

Correlation Coefficient

Southern Copper  Capital Drilling

Poor diversification

The 3 months correlation between Southern and Capital is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Southern Copper i.e., Southern Copper and Capital Drilling go up and down completely randomly.

Pair Corralation between Southern Copper and Capital Drilling

Assuming the 90 days trading horizon Southern Copper Corp is expected to generate 0.94 times more return on investment than Capital Drilling. However, Southern Copper Corp is 1.07 times less risky than Capital Drilling. It trades about 0.01 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.01 per unit of risk. If you would invest  10,935  in Southern Copper Corp on April 5, 2025 and sell it today you would lose (431.00) from holding Southern Copper Corp or give up 3.94% of portfolio value over 90 days.

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

Southern Copper Corp  vs.  Capital Drilling

Southern Copper Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Southern Copper unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capital Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Copper and Capital Drilling

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

The idea behind Southern Copper Corp and Capital Drilling 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.