Correlation Between First Quantum and Southern Copper
Can any of the company-specific risk be diversified away by investing in both First Quantum 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 First Quantum and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Quantum Minerals and Southern Copper, you can compare the effects of market volatilities on First Quantum 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 First Quantum with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Quantum and Southern Copper.
Diversification Opportunities for First Quantum and Southern Copper
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Southern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and First Quantum 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 First Quantum Minerals 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 First Quantum i.e., First Quantum and Southern Copper go up and down completely randomly.
Pair Corralation between First Quantum and Southern Copper
Assuming the 90 days horizon First Quantum Minerals is expected to generate 1.43 times more return on investment than Southern Copper. However, First Quantum is 1.43 times more volatile than Southern Copper. It trades about 0.04 of its potential returns per unit of risk. Southern Copper is currently generating about -0.02 per unit of risk. If you would invest 1,307 in First Quantum Minerals on August 25, 2024 and sell it today you would earn a total of 72.00 from holding First Quantum Minerals or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Quantum Minerals vs. Southern Copper
Performance |
| Timeline |
| First Quantum Minerals |
| Southern Copper |
First Quantum and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Quantum and Southern Copper
The main advantage of trading using opposite First Quantum and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Quantum 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.| First Quantum vs. Amerigo Resources | First Quantum vs. Antofagasta PLC | First Quantum vs. Capstone Copper Corp | First Quantum vs. Copper Mountain Mining |
| Southern Copper vs. Ero Copper Corp | Southern Copper vs. Hudbay Minerals | Southern Copper vs. Taseko Mines | Southern Copper vs. Amerigo Resources |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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