Correlation Between Freeport McMoran and PPL
Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and PPL 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 PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoran Copper Gold and PPL Corporation, you can compare the effects of market volatilities on Freeport McMoran and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and PPL.
Diversification Opportunities for Freeport McMoran and PPL
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freeport and PPL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 Copper Gold are associated (or correlated) with PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and PPL go up and down completely randomly.
Pair Corralation between Freeport McMoran and PPL
Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 2.11 times more return on investment than PPL. However, Freeport McMoran is 2.11 times more volatile than PPL Corporation. It trades about 0.03 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.01 per unit of risk. If you would invest 3,892 in Freeport McMoran Copper Gold on January 20, 2024 and sell it today you would earn a total of 1,069 from holding Freeport McMoran Copper Gold or generate 27.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoran Copper Gold vs. PPL Corp.
Performance |
| Timeline |
| Freeport McMoran Copper |
| PPL Corporation |
Freeport McMoran and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoran and PPL
The main advantage of trading using opposite Freeport McMoran and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Freeport McMoran vs. Ero Copper Corp | Freeport McMoran vs. Amerigo Resources | Freeport McMoran vs. Hudbay Minerals | Freeport McMoran vs. Southern Copper |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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