Correlation Between CME and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both CME 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 CME and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on CME 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 CME with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Freeport McMoran.
Diversification Opportunities for CME and Freeport McMoran
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between CME and Freeport is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CME Group 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 CME 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 CME Group 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 CME i.e., CME and Freeport McMoran go up and down completely randomly.
Pair Corralation between CME and Freeport McMoran
Considering the 90-day investment horizon CME Group is expected to under-perform the Freeport McMoran. But the stock apears to be less risky and, when comparing its historical volatility, CME Group is 1.36 times less risky than Freeport McMoran. The stock trades about 0.0 of its potential returns per unit of risk. The Freeport McMoran Copper Gold is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,460 in Freeport McMoran Copper Gold on January 26, 2024 and sell it today you would earn a total of 364.00 from holding Freeport McMoran Copper Gold or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CME Group vs. Freeport McMoran Copper Gold
Performance |
| Timeline |
| CME Group |
| Freeport McMoran Copper |
CME and Freeport McMoran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and Freeport McMoran
The main advantage of trading using opposite CME and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME 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 CME Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |