Correlation Between Boston Scientific and Freeport McMoRan

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Can any of the company-specific risk be diversified away by investing in both Boston Scientific and Freeport McMoRan 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 Boston Scientific and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Scientific Corp and Freeport McMoRan, you can compare the effects of market volatilities on Boston Scientific and Freeport McMoRan 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 Boston Scientific with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Scientific and Freeport McMoRan.

Diversification Opportunities for Boston Scientific and Freeport McMoRan

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Boston and Freeport is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific Corp and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Boston Scientific 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 Boston Scientific Corp are associated (or correlated) with Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Boston Scientific i.e., Boston Scientific and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Boston Scientific and Freeport McMoRan

Assuming the 90 days trading horizon Boston Scientific Corp is expected to generate 0.47 times more return on investment than Freeport McMoRan. However, Boston Scientific Corp is 2.11 times less risky than Freeport McMoRan. It trades about 0.09 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.09 per unit of risk. If you would invest  8,393  in Boston Scientific Corp on September 22, 2024 and sell it today you would earn a total of  524.00  from holding Boston Scientific Corp or generate 6.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.48%
ValuesDaily Returns

Boston Scientific Corp  vs.  Freeport McMoRan

 Performance 
       Timeline  
Boston Scientific Corp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Boston Scientific is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Freeport McMoRan 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Boston Scientific and Freeport McMoRan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boston Scientific and Freeport McMoRan

The main advantage of trading using opposite Boston Scientific and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.
The idea behind Boston Scientific Corp and Freeport McMoRan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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