Correlation Between Caledonia Mining and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining 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 Caledonia Mining and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Southern Copper Corp, you can compare the effects of market volatilities on Caledonia Mining 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 Caledonia Mining with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Southern Copper.
Diversification Opportunities for Caledonia Mining and Southern Copper
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Caledonia and Southern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper Corp and Caledonia Mining 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 Caledonia Mining 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 Corp has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Southern Copper go up and down completely randomly.
Pair Corralation between Caledonia Mining and Southern Copper
Assuming the 90 days trading horizon Caledonia Mining is expected to generate 0.93 times more return on investment than Southern Copper. However, Caledonia Mining is 1.08 times less risky than Southern Copper. It trades about -0.14 of its potential returns per unit of risk. Southern Copper Corp is currently generating about -0.14 per unit of risk. If you would invest 87,346 in Caledonia Mining on September 20, 2024 and sell it today you would lose (5,346) from holding Caledonia Mining or give up 6.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Mining vs. Southern Copper Corp
Performance |
| Timeline |
| Caledonia Mining |
| Southern Copper Corp |
Caledonia Mining and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Southern Copper
The main advantage of trading using opposite Caledonia Mining and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining 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.| Caledonia Mining vs. BE Semiconductor Industries | Caledonia Mining vs. Jacquet Metal Service | Caledonia Mining vs. Panther Metals PLC | Caledonia Mining vs. Darden Restaurants |
| Southern Copper vs. Silvercorp Metals | Southern Copper vs. Caledonia Mining | Southern Copper vs. Ecclesiastical Insurance Office | Southern Copper vs. Thor Mining PLC |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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