Correlation Between Freeport McMoran and AGF Management

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

Diversification Opportunities for Freeport McMoran and AGF Management

0.81

Correlation Coefficient

Freeport McMoran  AGF Management

Very poor diversification

The 3 months correlation between Freeport and AGF is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and AGF Management go up and down completely randomly.

Pair Corralation between Freeport McMoran and AGF Management

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 1.2 times more return on investment than AGF Management. However, Freeport McMoran is 1.2 times more volatile than AGF Management Limited. It trades about 0.05 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.05 per unit of risk. If you would invest  2,849  in Freeport McMoran Copper Gold on June 22, 2024 and sell it today you would earn a total of  1,610  from holding Freeport McMoran Copper Gold or generate 56.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.21%
Values	Daily Returns

Freeport McMoran Copper Gold  vs.  AGF Management Limited

Freeport McMoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoran Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AGF Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGF Management Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AGF Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Freeport McMoran and AGF Management

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

The idea behind Freeport McMoran Copper Gold and AGF Management Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.