Correlation Between United States and Southern Copper

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

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

Diversification Opportunities for United States and Southern Copper

-0.88

Correlation Coefficient

United States  Southern Copper

Pay attention - limited upside

The 3 months correlation between United and Southern is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and United States 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 United States Steel 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 United States i.e., United States and Southern Copper go up and down completely randomly.

Pair Corralation between United States and Southern Copper

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the Southern Copper. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.06 times less risky than Southern Copper. The stock trades about -0.15 of its potential returns per unit of risk. The Southern Copper is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  8,242  in Southern Copper on January 24, 2024 and sell it today you would earn a total of  2,916  from holding Southern Copper or generate 35.38% return on investment over 90 days.

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

United States Steel  vs.  Southern Copper

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Southern Copper

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Southern Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Southern Copper

The main advantage of trading using opposite United States and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.