Correlation Between Allstate and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both Allstate 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 Allstate and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on Allstate 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 Allstate with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Freeport McMoran.
Diversification Opportunities for Allstate and Freeport McMoran
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Allstate and Freeport is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Allstate 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 The Allstate 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 Copper has no effect on the direction of Allstate i.e., Allstate and Freeport McMoran go up and down completely randomly.
Pair Corralation between Allstate and Freeport McMoran
Considering the 90-day investment horizon Allstate is expected to generate 1.11 times less return on investment than Freeport McMoran. But when comparing it to its historical volatility, The Allstate is 1.91 times less risky than Freeport McMoran. It trades about 0.25 of its potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,345 in Freeport McMoran Copper Gold on January 25, 2024 and sell it today you would earn a total of 1,479 from holding Freeport McMoran Copper Gold or generate 44.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Freeport McMoran Copper Gold
Performance |
| Timeline |
| Allstate |
| Freeport McMoran Copper |
Allstate and Freeport McMoran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Freeport McMoran
The main advantage of trading using opposite Allstate and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate 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 The Allstate and Freeport McMoran Copper Gold 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.| Freeport McMoran vs. Ero Copper Corp | Freeport McMoran vs. Taseko Mines | Freeport McMoran vs. Metals Acquisition Limited | Freeport McMoran vs. Hecla Mining |
Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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