Correlation Between Freeport McMoran and LG Cyber

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

Diversification Opportunities for Freeport McMoran and LG Cyber

0.14

Correlation Coefficient

Freeport McMoran  LG Cyber

Average diversification

The 3 months correlation between Freeport and ISPY is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and LG Cyber Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Cyber Security 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 LG Cyber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Cyber Security has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and LG Cyber go up and down completely randomly.

Pair Corralation between Freeport McMoran and LG Cyber

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 1.48 times more return on investment than LG Cyber. However, Freeport McMoran is 1.48 times more volatile than LG Cyber Security. It trades about 0.36 of its potential returns per unit of risk. LG Cyber Security is currently generating about 0.12 per unit of risk. If you would invest  4,435  in Freeport McMoran Copper Gold on January 16, 2024 and sell it today you would earn a total of  567.00  from holding Freeport McMoran Copper Gold or generate 12.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Freeport McMoran Copper Gold  vs.  LG Cyber Security

Freeport McMoran Copper

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Freeport McMoran showed solid returns over the last few months and may actually be approaching a breakup point.

LG Cyber Security

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LG Cyber Security are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, LG Cyber is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Freeport McMoran and LG Cyber

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

The idea behind Freeport McMoran Copper Gold and LG Cyber Security 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.