Correlation Between Xiaomi and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Xiaomi 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 Xiaomi and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xiaomi and Southern Copper, you can compare the effects of market volatilities on Xiaomi 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 Xiaomi with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiaomi and Southern Copper.
Diversification Opportunities for Xiaomi and Southern Copper
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xiaomi and Southern is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and Xiaomi 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 Xiaomi 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 Xiaomi i.e., Xiaomi and Southern Copper go up and down completely randomly.
Pair Corralation between Xiaomi and Southern Copper
Assuming the 90 days trading horizon Xiaomi is expected to generate 1.7 times more return on investment than Southern Copper. However, Xiaomi is 1.7 times more volatile than Southern Copper. It trades about 0.12 of its potential returns per unit of risk. Southern Copper is currently generating about 0.11 per unit of risk. If you would invest 3,100 in Xiaomi on September 4, 2024 and sell it today you would earn a total of 4,600 from holding Xiaomi or generate 148.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.59% |
| Values | Daily Returns |
Xiaomi vs. Southern Copper
Performance |
| Timeline |
| Xiaomi |
| Southern Copper |
Xiaomi and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xiaomi and Southern Copper
The main advantage of trading using opposite Xiaomi and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiaomi 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.| Xiaomi vs. Deutsche Bank Aktiengesellschaft | Xiaomi vs. Lloyds Banking Group | Xiaomi vs. Prudential Financial | Xiaomi vs. DXC Technology |
| Southern Copper vs. Grupo Hotelero Santa | Southern Copper vs. The Walt Disney | Southern Copper vs. International Business Machines | Southern Copper vs. Prudential Financial |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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