Correlation Between Visa and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both Visa and Freeport McMoran 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 Visa and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on Visa and Freeport McMoran 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 Visa with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Freeport McMoran.
Diversification Opportunities for Visa and Freeport McMoran
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Freeport is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Visa 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 Visa Class A are associated (or correlated) with Freeport McMoran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoran Copper has no effect on the direction of Visa i.e., Visa and Freeport McMoran go up and down completely randomly.
Pair Corralation between Visa and Freeport McMoran
Taking into account the 90-day investment horizon Visa is expected to generate 11.55 times less return on investment than Freeport McMoran. But when comparing it to its historical volatility, Visa Class A is 3.39 times less risky than Freeport McMoran. It trades about 0.01 of its potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,050 in Freeport McMoran Copper Gold on February 26, 2024 and sell it today you would earn a total of 103.00 from holding Freeport McMoran Copper Gold or generate 2.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Freeport McMoran Copper Gold
Performance |
Timeline |
Visa Class A |
Freeport McMoran Copper |
Visa and Freeport McMoran Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Freeport McMoran
The main advantage of trading using opposite Visa and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Freeport McMoran 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 Freeport McMoran will offset losses from the drop in Freeport McMoran's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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Check out your portfolio center.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 Valuation module to check real value of public entities based on technical and fundamental data.
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