Correlation Between Amazon and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Freeport McMoRan, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Freeport McMoRan.
Diversification Opportunities for Amazon and Freeport McMoRan
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and Freeport is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Amazon 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 Amazon Inc 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 has no effect on the direction of Amazon i.e., Amazon and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Amazon and Freeport McMoRan
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.7 times more return on investment than Freeport McMoRan. However, Amazon Inc is 1.42 times less risky than Freeport McMoRan. It trades about 0.4 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.27 per unit of risk. If you would invest 20,000 in Amazon Inc on September 24, 2024 and sell it today you would earn a total of 2,550 from holding Amazon Inc or generate 12.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Freeport McMoRan
Performance |
| Timeline |
| Amazon Inc |
| Freeport McMoRan |
Amazon and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Freeport McMoRan
The main advantage of trading using opposite Amazon and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.| Amazon vs. Primary Health Properties | Amazon vs. Universal Health Services | Amazon vs. Celebrus Technologies plc | Amazon vs. PureTech Health plc |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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