Correlation Between Freeport McMoran and Shawcor
Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Shawcor 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 Shawcor 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 Shawcor, you can compare the effects of market volatilities on Freeport McMoran and Shawcor 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 Shawcor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Shawcor.
Diversification Opportunities for Freeport McMoran and Shawcor
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Freeport and Shawcor is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Shawcor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shawcor 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 Shawcor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shawcor has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Shawcor go up and down completely randomly.
Pair Corralation between Freeport McMoran and Shawcor
Considering the 90-day investment horizon Freeport McMoran is expected to generate 1.95 times less return on investment than Shawcor. But when comparing it to its historical volatility, Freeport McMoran Copper Gold is 1.24 times less risky than Shawcor. It trades about 0.03 of its potential returns per unit of risk. Shawcor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,026 in Shawcor on January 25, 2024 and sell it today you would earn a total of 299.00 from holding Shawcor or generate 29.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.08% |
| Values | Daily Returns |
Freeport McMoran Copper Gold vs. Shawcor
Performance |
| Timeline |
| Freeport McMoran Copper |
| Shawcor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Freeport McMoran and Shawcor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoran and Shawcor
The main advantage of trading using opposite Freeport McMoran and Shawcor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, Shawcor 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 Shawcor will offset losses from the drop in Shawcor's long position.The idea behind Freeport McMoran Copper Gold and Shawcor 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.| Shawcor vs. Indo Tambangraya Megah | Shawcor vs. Bukit Asam Tbk | Shawcor vs. Geo Energy Resources | Shawcor vs. Yancoal Australia |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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