Correlation Between Freeport McMoran and Trigon Metals

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

Diversification Opportunities for Freeport McMoran and Trigon Metals

-0.63

Correlation Coefficient

Freeport McMoran  Trigon Metals

Excellent diversification

The 3 months correlation between Freeport and Trigon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Trigon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trigon Metals 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 Trigon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trigon Metals has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Trigon Metals go up and down completely randomly.

Pair Corralation between Freeport McMoran and Trigon Metals

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.31 times more return on investment than Trigon Metals. However, Freeport McMoran Copper Gold is 3.2 times less risky than Trigon Metals. It trades about 0.14 of its potential returns per unit of risk. Trigon Metals is currently generating about 0.03 per unit of risk. If you would invest  4,719  in Freeport McMoran Copper Gold on February 1, 2024 and sell it today you would earn a total of  275.00  from holding Freeport McMoran Copper Gold or generate 5.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Freeport McMoran Copper Gold  vs.  Trigon Metals

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.

Trigon Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trigon Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Freeport McMoran and Trigon Metals

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

The idea behind Freeport McMoran Copper Gold and Trigon Metals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.