Correlation Between China Hongqiao and Freeport McMoran
Can any of the company-specific risk be diversified away by investing in both China Hongqiao 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 China Hongqiao and Freeport McMoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Hongqiao Group and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on China Hongqiao 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 China Hongqiao with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Freeport McMoran.
Diversification Opportunities for China Hongqiao and Freeport McMoran
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Freeport is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group 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 China Hongqiao 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 China Hongqiao Group 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 China Hongqiao i.e., China Hongqiao and Freeport McMoran go up and down completely randomly.
Pair Corralation between China Hongqiao and Freeport McMoran
Assuming the 90 days horizon China Hongqiao Group is expected to generate 4.16 times more return on investment than Freeport McMoran. However, China Hongqiao is 4.16 times more volatile than Freeport McMoran Copper Gold. It trades about 0.18 of its potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about -0.21 per unit of risk. If you would invest 103.00 in China Hongqiao Group on September 5, 2024 and sell it today you would earn a total of 63.00 from holding China Hongqiao Group or generate 61.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Hongqiao Group vs. Freeport McMoran Copper Gold
Performance |
| Timeline |
| China Hongqiao Group |
| Freeport McMoran Copper |
China Hongqiao and Freeport McMoran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Hongqiao and Freeport McMoran
The main advantage of trading using opposite China Hongqiao and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao 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.| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
| Freeport McMoran vs. Constellium Nv | Freeport McMoran vs. Century Aluminum | Freeport McMoran vs. China Hongqiao Group | Freeport McMoran vs. Kaiser Aluminum |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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