Correlation Between Freeport McMoran and International Money

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

Diversification Opportunities for Freeport McMoran and International Money

0.71

Correlation Coefficient

Freeport McMoran  International Money

Poor diversification

The 3 months correlation between Freeport and International is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and International Money Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Money 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 International Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Money has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and International Money go up and down completely randomly.

Pair Corralation between Freeport McMoran and International Money

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.88 times more return on investment than International Money. However, Freeport McMoran Copper Gold is 1.13 times less risky than International Money. It trades about 0.06 of its potential returns per unit of risk. International Money Express is currently generating about -0.01 per unit of risk. If you would invest  3,710  in Freeport McMoran Copper Gold on January 26, 2024 and sell it today you would earn a total of  1,114  from holding Freeport McMoran Copper Gold or generate 30.03% 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.  International Money Express

Freeport McMoran Copper

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Freeport McMoran showed solid returns over the last few months and may actually be approaching a breakup point.

International Money

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Money Express are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, International Money may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Freeport McMoran and International Money

The main advantage of trading using opposite Freeport McMoran and International Money positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, International Money 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 International Money will offset losses from the drop in International Money's long position.

The idea behind Freeport McMoran Copper Gold and International Money Express 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.