Correlation Between Southern Copper and Kaiser Aluminum

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

Diversification Opportunities for Southern Copper and Kaiser Aluminum

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Southern and Kaiser is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Southern Copper i.e., Southern Copper and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Southern Copper and Kaiser Aluminum

Given the investment horizon of 90 days Southern Copper is expected to generate 0.81 times more return on investment than Kaiser Aluminum. However, Southern Copper is 1.23 times less risky than Kaiser Aluminum. It trades about 0.05 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.02 per unit of risk. If you would invest  6,587  in Southern Copper on December 30, 2023 and sell it today you would earn a total of  4,065  from holding Southern Copper or generate 61.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Southern Copper  vs.  Kaiser Aluminum

 Performance 
       Timeline  
Southern Copper 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 14 (%) 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.
Kaiser Aluminum 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Kaiser Aluminum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Southern Copper and Kaiser Aluminum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southern Copper and Kaiser Aluminum

The main advantage of trading using opposite Southern Copper and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.
The idea behind Southern Copper and Kaiser Aluminum 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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