Correlation Between Nexa Resources and Southern Copper

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

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

Diversification Opportunities for Nexa Resources and Southern Copper

0.83

Correlation Coefficient

Nexa Resources  Southern Copper

Very poor diversification

The 3 months correlation between Nexa and Southern is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources SA and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Nexa Resources 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 Nexa Resources SA 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 has no effect on the direction of Nexa Resources i.e., Nexa Resources and Southern Copper go up and down completely randomly.

Pair Corralation between Nexa Resources and Southern Copper

Given the investment horizon of 90 days Nexa Resources is expected to generate 5.17 times less return on investment than Southern Copper. In addition to that, Nexa Resources is 1.41 times more volatile than Southern Copper. It trades about 0.01 of its total potential returns per unit of risk. Southern Copper is currently generating about 0.08 per unit of volatility. If you would invest  5,337  in Southern Copper on February 8, 2024 and sell it today you would earn a total of  6,170  from holding Southern Copper or generate 115.61% return on investment over 90 days.

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

Nexa Resources SA  vs.  Southern Copper

Nexa Resources SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexa Resources SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Nexa Resources may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Southern Copper

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Southern Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexa Resources and Southern Copper

The main advantage of trading using opposite Nexa Resources and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexa Resources 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 Nexa Resources SA and Southern Copper 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..