Correlation Between Alcoa Corp and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Southern Copper, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Southern Copper.
Diversification Opportunities for Alcoa Corp and Southern Copper
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alcoa and Southern is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Southern Copper go up and down completely randomly.
Pair Corralation between Alcoa Corp and Southern Copper
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Southern Copper. In addition to that, Alcoa Corp is 1.45 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 7,022 in Southern Copper on January 24, 2024 and sell it today you would earn a total of 3,942 from holding Southern Copper or generate 56.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Southern Copper
Performance |
| Timeline |
| Alcoa Corp |
| Southern Copper |
Alcoa Corp and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Southern Copper
The main advantage of trading using opposite Alcoa Corp and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp 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.Check out your portfolio center.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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