Correlation Between Southern Copper and AES Corp
Can any of the company-specific risk be diversified away by investing in both Southern Copper and AES Corp 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 AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Copper Corp and AES Corp, you can compare the effects of market volatilities on Southern Copper and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and AES Corp.
Diversification Opportunities for Southern Copper and AES Corp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and AES is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper Corp and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp 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 Corp are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Southern Copper i.e., Southern Copper and AES Corp go up and down completely randomly.
Pair Corralation between Southern Copper and AES Corp
Assuming the 90 days trading horizon Southern Copper Corp is expected to generate 3.67 times more return on investment than AES Corp. However, Southern Copper is 3.67 times more volatile than AES Corp. It trades about 0.04 of its potential returns per unit of risk. AES Corp is currently generating about -0.04 per unit of risk. If you would invest 7,281 in Southern Copper Corp on September 12, 2024 and sell it today you would earn a total of 3,054 from holding Southern Copper Corp or generate 41.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Southern Copper Corp vs. AES Corp
Performance |
| Timeline |
| Southern Copper Corp |
| AES Corp |
Southern Copper and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Copper and AES Corp
The main advantage of trading using opposite Southern Copper and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.| Southern Copper vs. Prudential Financial | Southern Copper vs. Ecclesiastical Insurance Office | Southern Copper vs. Litigation Capital Management | Southern Copper vs. OneSavings Bank PLC |
| AES Corp vs. JB Hunt Transport | AES Corp vs. Alior Bank SA | AES Corp vs. Royal Bank of | AES Corp vs. Erste Group Bank |
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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