Correlation Between Freeport McMoran and Vanguard Russell

Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Vanguard Russell 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 Vanguard Russell 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 Vanguard Russell 2000, you can compare the effects of market volatilities on Freeport McMoran and Vanguard Russell 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 Vanguard Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Vanguard Russell.

Diversification Opportunities for Freeport McMoran and Vanguard Russell

-0.54

Correlation Coefficient

Freeport McMoran  Vanguard Russell

Excellent diversification

The 1 month correlation between Freeport and Vanguard is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Vanguard Russell go up and down completely randomly.

Pair Corralation between Freeport McMoran and Vanguard Russell

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 1.37 times more return on investment than Vanguard Russell. However, Freeport McMoran is 1.37 times more volatile than Vanguard Russell 2000. It trades about 0.28 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about -0.29 per unit of risk. If you would invest  4,587  in Freeport McMoran Copper Gold on January 20, 2024 and sell it today you would earn a total of  429.00  from holding Freeport McMoran Copper Gold or generate 9.35% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Freeport McMoran Copper Gold  vs.  Vanguard Russell 2000

Freeport McMoran Copper

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 21 (%) 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.

Vanguard Russell 2000

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Freeport McMoran and Vanguard Russell

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

The idea behind Freeport McMoran Copper Gold and Vanguard Russell 2000 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.