Correlation Between Marks and Freeport McMoRan

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

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

Diversification Opportunities for Marks and Freeport McMoRan

-0.32

Correlation Coefficient

Marks  Freeport McMoRan

Very good diversification

The 3 months correlation between Marks and Freeport is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Marks 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 Marks and Spencer 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 Marks i.e., Marks and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Marks and Freeport McMoRan

Assuming the 90 days trading horizon Marks and Spencer is expected to generate 0.64 times more return on investment than Freeport McMoRan. However, Marks and Spencer is 1.57 times less risky than Freeport McMoRan. It trades about 0.02 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.09 per unit of risk. If you would invest  37,502  in Marks and Spencer on September 22, 2024 and sell it today you would earn a total of  438.00  from holding Marks and Spencer or generate 1.17% return on investment over 90 days.

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

Marks and Spencer  vs.  Freeport McMoRan

Marks and Spencer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Marks is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Marks and Freeport McMoRan

The main advantage of trading using opposite Marks and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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 Marks and Spencer 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.