Correlation Between United States and Freeport McMoran

Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on United States 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 United States with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Freeport McMoran.

Diversification Opportunities for United States and Freeport McMoran

-0.87

Correlation Coefficient

United States  Freeport McMoran

Pay attention - limited upside

The 3 months correlation between United and Freeport is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Freeport McMoran go up and down completely randomly.

Pair Corralation between United States and Freeport McMoran

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the Freeport McMoran. In addition to that, United States is 1.08 times more volatile than Freeport McMoran Copper Gold. It trades about -0.12 of its total potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.29 per unit of volatility. If you would invest  3,709  in Freeport McMoran Copper Gold on February 14, 2024 and sell it today you would earn a total of  1,639  from holding Freeport McMoran Copper Gold or generate 44.19% return on investment over 90 days.

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

United States Steel  vs.  Freeport McMoran Copper Gold

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Freeport McMoran Copper

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Freeport McMoran showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Freeport McMoran

The main advantage of trading using opposite United States and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.

The idea behind United States Steel and Freeport McMoran Copper Gold 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.