Correlation Between Freeport McMoRan and Biotech Growth
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Biotech Growth 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 Biotech Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and The Biotech Growth, you can compare the effects of market volatilities on Freeport McMoRan and Biotech Growth 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 Biotech Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Biotech Growth.
Diversification Opportunities for Freeport McMoRan and Biotech Growth
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freeport and Biotech is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and The Biotech Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotech Growth 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 are associated (or correlated) with Biotech Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotech Growth has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Biotech Growth go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Biotech Growth
Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the Biotech Growth. In addition to that, Freeport McMoRan is 1.91 times more volatile than The Biotech Growth. It trades about -0.17 of its total potential returns per unit of risk. The Biotech Growth is currently generating about 0.07 per unit of volatility. If you would invest 86,800 in The Biotech Growth on November 6, 2024 and sell it today you would earn a total of 1,300 from holding The Biotech Growth or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoRan vs. The Biotech Growth
Performance |
| Timeline |
| Freeport McMoRan |
| Biotech Growth |
Freeport McMoRan and Biotech Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Biotech Growth
The main advantage of trading using opposite Freeport McMoRan and Biotech Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Biotech Growth 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 Biotech Growth will offset losses from the drop in Biotech Growth's long position.| Freeport McMoRan vs. AMG Advanced Metallurgical | Freeport McMoRan vs. GreenX Metals | Freeport McMoRan vs. Synthomer plc | Freeport McMoRan vs. Cairn Homes PLC |
| Biotech Growth vs. Quadrise Plc | Biotech Growth vs. ImmuPharma PLC | Biotech Growth vs. Intuitive Investments Group | Biotech Growth vs. European Metals Holdings |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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