Correlation Between International Business and Southern Copper
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Southern Copper, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Southern Copper.
Diversification Opportunities for International Business and Southern Copper
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between International and Southern is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and International Business 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 International Business Machines 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 International Business i.e., International Business and Southern Copper go up and down completely randomly.
Pair Corralation between International Business and Southern Copper
Assuming the 90 days trading horizon International Business Machines is expected to generate 1.19 times more return on investment than Southern Copper. However, International Business is 1.19 times more volatile than Southern Copper. It trades about 0.28 of its potential returns per unit of risk. Southern Copper is currently generating about -0.2 per unit of risk. If you would invest 418,592 in International Business Machines on September 5, 2024 and sell it today you would earn a total of 45,408 from holding International Business Machines or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Southern Copper
Performance |
| Timeline |
| International Business |
| Southern Copper |
International Business and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Southern Copper
The main advantage of trading using opposite International Business and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.| International Business vs. The Select Sector | International Business vs. Promotora y Operadora | International Business vs. SPDR Series Trust | International Business vs. Vanguard World |
| Southern Copper vs. First Republic Bank | Southern Copper vs. Lloyds Banking Group | Southern Copper vs. Cognizant Technology Solutions | Southern Copper vs. Grupo Sports World |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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