Correlation Between Freeport McMoran and United States

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Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and United States 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 United States 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 United States Steel, you can compare the effects of market volatilities on Freeport McMoran and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and United States.

Diversification Opportunities for Freeport McMoran and United States

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Freeport and United is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Freeport-McMoran Copper Gold and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and United States go up and down completely randomly.

Pair Corralation between Freeport McMoran and United States

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.76 times more return on investment than United States. However, Freeport McMoran Copper Gold is 1.31 times less risky than United States. It trades about 0.36 of its potential returns per unit of risk. United States Steel is currently generating about -0.19 per unit of risk. If you would invest  3,816  in Freeport McMoran Copper Gold on December 29, 2023 and sell it today you would earn a total of  772.00  from holding Freeport McMoran Copper Gold or generate 20.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Freeport-McMoran Copper Gold  vs.  United States Steel

 Performance 
       Timeline  
Freeport-McMoran Copper 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Freeport McMoran may actually be approaching a critical reversion point that can send shares even higher in April 2024.
United States Steel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Freeport McMoran and United States Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Freeport McMoran and United States

The main advantage of trading using opposite Freeport McMoran and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.
The idea behind Freeport McMoran Copper Gold and United States Steel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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