Correlation Between Southern Copper and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Southern Copper and Archer Daniels 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 Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Copper and Archer Daniels Midland, you can compare the effects of market volatilities on Southern Copper and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Archer Daniels.
Diversification Opportunities for Southern Copper and Archer Daniels
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southern and Archer is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Southern Copper i.e., Southern Copper and Archer Daniels go up and down completely randomly.
Pair Corralation between Southern Copper and Archer Daniels
Assuming the 90 days trading horizon Southern Copper is expected to generate 1.14 times more return on investment than Archer Daniels. However, Southern Copper is 1.14 times more volatile than Archer Daniels Midland. It trades about 0.06 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.05 per unit of risk. If you would invest 141,000 in Southern Copper on February 15, 2024 and sell it today you would earn a total of 51,993 from holding Southern Copper or generate 36.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 99.65% |
Values | Daily Returns |
Southern Copper vs. Archer Daniels Midland
Performance |
Timeline |
Southern Copper |
Archer Daniels Midland |
Southern Copper and Archer Daniels Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southern Copper and Archer Daniels
The main advantage of trading using opposite Southern Copper and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.Southern Copper vs. KB Home | Southern Copper vs. DXC Technology | Southern Copper vs. Samsung Electronics Co | Southern Copper vs. Southwest Airlines |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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