Correlation Between Los Andes and World Copper
Can any of the company-specific risk be diversified away by investing in both Los Andes and World 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 Los Andes and World Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Los Andes Copper and World Copper, you can compare the effects of market volatilities on Los Andes and World 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 Los Andes with a short position of World Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Los Andes and World Copper.
Diversification Opportunities for Los Andes and World Copper
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Los and World is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Los Andes Copper and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper and Los Andes 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 Los Andes Copper are associated (or correlated) with World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of Los Andes i.e., Los Andes and World Copper go up and down completely randomly.
Pair Corralation between Los Andes and World Copper
Assuming the 90 days horizon Los Andes Copper is expected to generate 0.7 times more return on investment than World Copper. However, Los Andes Copper is 1.43 times less risky than World Copper. It trades about -0.04 of its potential returns per unit of risk. World Copper is currently generating about -0.08 per unit of risk. If you would invest 573.00 in Los Andes Copper on September 3, 2024 and sell it today you would lose (19.00) from holding Los Andes Copper or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Los Andes Copper vs. World Copper
Performance |
| Timeline |
| Los Andes Copper |
| World Copper |
Los Andes and World Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Los Andes and World Copper
The main advantage of trading using opposite Los Andes and World Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Los Andes position performs unexpectedly, World 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 World Copper will offset losses from the drop in World Copper's long position.| Los Andes vs. World Copper | Los Andes vs. QC Copper and | Los Andes vs. Hot Chili Limited | Los Andes vs. Three Valley Copper |
| World Copper vs. Hot Chili Limited | World Copper vs. Three Valley Copper | World Copper vs. Los Andes Copper | World Copper vs. QC Copper and |
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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