Correlation Between Freeport McMoRan and DOW

By analyzing existing cross correlation between Freeport McMoRan and DOW, you can compare the effects of market volatilities on Freeport McMoRan and DOW 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 DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and DOW.

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Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and DOW 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 DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Freeport McMoRan and DOW

0.93
  Correlation Coefficient
Freeport McMoRan
DOW

Almost no diversification

The 3 months correlation between Freeport and DOW is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan Inc and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW 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 are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Freeport McMoRan i.e. Freeport McMoRan and DOW go up and down completely randomly.
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Pair Corralation between Freeport McMoRan and DOW

Considering the 30-days investment horizon, Freeport McMoRan is expected to generate 2.23 times more return on investment than DOW. However, Freeport McMoRan is 2.23 times more volatile than DOW. It trades about 0.2 of its potential returns per unit of risk. DOW is currently generating about 0.12 per unit of risk. If you would invest  719.00  in Freeport McMoRan on June 3, 2020 and sell it today you would earn a total of  431.00  from holding Freeport McMoRan or generate 59.94% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Freeport McMoRan Inc  vs.  DOW

 Performance (%) 
      Timeline 
 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.


 
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