Correlation Between Southern Copper and Carpenter Technology

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Can any of the company-specific risk be diversified away by investing in both Southern Copper and Carpenter Technology 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 Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Copper and Carpenter Technology, you can compare the effects of market volatilities on Southern Copper and Carpenter Technology 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 Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Carpenter Technology.

Diversification Opportunities for Southern Copper and Carpenter Technology

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Southern and Carpenter is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology 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 Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of Southern Copper i.e., Southern Copper and Carpenter Technology go up and down completely randomly.

Pair Corralation between Southern Copper and Carpenter Technology

Given the investment horizon of 90 days Southern Copper is expected to generate 1.31 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, Southern Copper is 1.17 times less risky than Carpenter Technology. It trades about 0.05 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,911  in Carpenter Technology on December 29, 2023 and sell it today you would earn a total of  3,108  from holding Carpenter Technology or generate 79.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Southern Copper  vs.  Carpenter Technology

 Performance 
       Timeline  
Southern Copper 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Southern Copper displayed solid returns over the last few months and may actually be approaching a breakup point.
Carpenter Technology 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Carpenter Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carpenter Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Southern Copper and Carpenter Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southern Copper and Carpenter Technology

The main advantage of trading using opposite Southern Copper and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, Carpenter Technology 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 Carpenter Technology will offset losses from the drop in Carpenter Technology's long position.
The idea behind Southern Copper and Carpenter Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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