Correlation Between Southern Copper and Home Depot
Can any of the company-specific risk be diversified away by investing in both Southern Copper and Home Depot 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 Southern Copper and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Copper and The Home Depot, you can compare the effects of market volatilities on Southern Copper and Home Depot 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 Southern Copper with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Copper and Home Depot.
Diversification Opportunities for Southern Copper and Home Depot
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southern and Home is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Southern Copper 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 Southern Copper are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Southern Copper i.e., Southern Copper and Home Depot go up and down completely randomly.
Pair Corralation between Southern Copper and Home Depot
Assuming the 90 days trading horizon Southern Copper is expected to generate 1.32 times more return on investment than Home Depot. However, Southern Copper is 1.32 times more volatile than The Home Depot. It trades about 0.06 of its potential returns per unit of risk. The Home Depot is currently generating about 0.06 per unit of risk. If you would invest 130,622 in Southern Copper on November 2, 2024 and sell it today you would earn a total of 84,378 from holding Southern Copper or generate 64.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Copper vs. The Home Depot
Performance |
| Timeline |
| Southern Copper |
| Home Depot |
Southern Copper and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Copper and Home Depot
The main advantage of trading using opposite Southern Copper and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Southern Copper vs. McEwen Mining | Southern Copper vs. Capital One Financial | Southern Copper vs. UnitedHealth Group Incorporated | Southern Copper vs. Grupo Carso SAB |
| Home Depot vs. Southern Copper | Home Depot vs. Capital One Financial | Home Depot vs. Verizon Communications | Home Depot vs. Genworth 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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