Correlation of copper and Chilean pesso. Investment in the future
The Forex market is considered to be one of the most unpredictable, since exchange rates can be influenced by many factors, ranging from internal monetary policy to various external factors.
Such unpredictability is primarily preserved by the largest world units such as the dollar, euro and pound.
At the same time, easily predictable exotic instruments lie practically on the surface, where either an industry or raw material relationship can be traced.
The Chilean peso has one of the most pronounced relationships between metal prices and the national currency exchange rate, and in this article you will learn how to use this relationship for your own purposes.
Copper and Pesso. Reasons for growth
Copper is not a precious metal like gold and silver, but despite this its price has been growing for several years.
In an era when key automobile concerns began to refocus on the creation of electric cars, copper is becoming an extremely popular metal.
And if now electric cars are extremely rarely seen within the city, then imagine how much the demand for ore will increase at the moment when these cars enter the general public.
Copper, one way or another, is involved in all sectors of the economy, from construction and mechanical engineering, to electronics, transport and all sorts of other industries where mechanization is present in one way or another.
As an example, we offer a look at the structure of copper consumption in the world and its importance in different industries.
Considering the fact that scientific progress does not stand still, and all areas of industry are gradually becoming robotized, the demand for copper will grow every year.
Now let’s take a look at the structure of oil production by country, which you can see below:
From the chart above you can see that the largest leader in copper ore mining, as well as copper processing and sales, is Chile.
Just imagine that one third of all copper is mined and sold by this strange one. Therefore, the basis for the exchange rate stability of this country, namely the peso currency, is world copper prices.
Correlation of copper and the Chilean peso. How to benefit from it
As noted, Chile is the world's largest copper exporter, possessing a third of the world's reserves and a leader in the metals market.
The share of profit in the state budget is at a very high level, so there is a direct relationship between the exchange rate of the Chilean peso and copper. As an example, let's take a look at the copper chart for the last year:
Now, as a comparison, let's look at the chart of the USDCLP (Dollar/Chilean Peso) currency pair.
It is worth understanding that this quote is inverse and reflects how much one dollar costs per pesso, and not vice versa. Therefore, the fall in the chart should only be considered as a strengthening of the Chilean peso.
In order to check the correlation, not visual, but real technical, we used the auxiliary indicator I Correlation Table ( ftp/indikator/iCorrelationTable_v3.rar ), which shows us reverse or direct correlation, which ranges from -1 to +1.
The research results are shown below:
As you can see, not only is there a visual inverse correlation between the instruments, but the I Correlation Table indicator also records a very high coefficient, which is -0.94.
This indicates that there is a direct relationship between assets. In practice, this allows the trader to use a guide strategy, namely, if copper begins to rise, then one should expect the Chilean peso to strengthen and vice versa.
In conclusion, I would like to note that investing in copper and the Chilean peso is an investment in the future. Thanks to the high correlation of these instruments, you can create arbitrage strategies and earn money with the lowest possible risk.