Correlation Between Freeport McMoRan and Check Point

Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Check Point 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 Freeport McMoRan and Check Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freeport McMoRan and Check Point Software, you can compare the effects of market volatilities on Freeport McMoRan and Check Point 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 Freeport McMoRan with a short position of Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Check Point.

Diversification Opportunities for Freeport McMoRan and Check Point

0.45

Correlation Coefficient

Freeport McMoRan  Check Point

Very weak diversification

The 3 months correlation between Freeport and Check is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software and Freeport McMoRan 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 Freeport McMoRan are associated (or correlated) with Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Check Point go up and down completely randomly.

Pair Corralation between Freeport McMoRan and Check Point

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the Check Point. In addition to that, Freeport McMoRan is 1.06 times more volatile than Check Point Software. It trades about -0.09 of its total potential returns per unit of risk. Check Point Software is currently generating about -0.02 per unit of volatility. If you would invest  19,521  in Check Point Software on September 23, 2024 and sell it today you would lose (828.00) from holding Check Point Software or give up 4.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Freeport McMoRan  vs.  Check Point Software

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

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.

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Check Point is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Freeport McMoRan and Check Point

The main advantage of trading using opposite Freeport McMoRan and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.

The idea behind Freeport McMoRan and Check Point Software 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.