Correlation Between Applied Materials and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Freeport McMoRan, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Freeport McMoRan.
Diversification Opportunities for Applied Materials and Freeport McMoRan
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Freeport is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Applied Materials and Freeport McMoRan
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Freeport McMoRan. In addition to that, Applied Materials is 1.14 times more volatile than Freeport McMoRan. It trades about -0.01 of its total potential returns per unit of risk. Freeport McMoRan is currently generating about 0.01 per unit of volatility. If you would invest 87,678 in Freeport McMoRan on September 3, 2024 and sell it today you would earn a total of 165.00 from holding Freeport McMoRan or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Applied Materials vs. Freeport McMoRan
Performance |
| Timeline |
| Applied Materials |
| Freeport McMoRan |
Applied Materials and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Freeport McMoRan
The main advantage of trading using opposite Applied Materials and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. SPDR Series Trust | Applied Materials vs. Vanguard World |
| Freeport McMoRan vs. Applied Materials | Freeport McMoRan vs. Verizon Communications | Freeport McMoRan vs. Grupo Hotelero Santa | Freeport McMoRan vs. Ameriprise Financial |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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