Correlation Between Freeport McMoRan and 70GD

Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and 70GD 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 70GD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freeport McMoRan and 70GD, you can compare the effects of market volatilities on Freeport McMoRan and 70GD 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 70GD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and 70GD.

Diversification Opportunities for Freeport McMoRan and 70GD

-0.62

Correlation Coefficient

Freeport McMoRan  70GD

Excellent diversification

The 3 months correlation between Freeport and 70GD is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and 70GD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 70GD 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 70GD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 70GD has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and 70GD go up and down completely randomly.

Pair Corralation between Freeport McMoRan and 70GD

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the 70GD. In addition to that, Freeport McMoRan is 4.18 times more volatile than 70GD. It trades about -0.09 of its total potential returns per unit of risk. 70GD is currently generating about 0.12 per unit of volatility. If you would invest  68.00  in 70GD on September 23, 2024 and sell it today you would earn a total of  3.00  from holding 70GD or generate 4.41% return on investment over 90 days.

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

Freeport McMoRan  vs.  70GD

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 unsteady 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.

70GD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 70GD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, 70GD 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 70GD

The main advantage of trading using opposite Freeport McMoRan and 70GD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, 70GD 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 70GD will offset losses from the drop in 70GD's long position.

The idea behind Freeport McMoRan and 70GD 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.