Correlation Between European Metals and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Freeport McMoRan, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Freeport McMoRan.
Diversification Opportunities for European Metals and Freeport McMoRan
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between European and Freeport is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Freeport McMoRan go up and down completely randomly.
Pair Corralation between European Metals and Freeport McMoRan
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Freeport McMoRan. In addition to that, European Metals is 1.65 times more volatile than Freeport McMoRan. It trades about -0.06 of its total potential returns per unit of risk. Freeport McMoRan is currently generating about 0.0 per unit of volatility. If you would invest 4,418 in Freeport McMoRan on October 11, 2024 and sell it today you would lose (467.00) from holding Freeport McMoRan or give up 10.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Freeport McMoRan
Performance |
| Timeline |
| European Metals Holdings |
| Freeport McMoRan |
European Metals and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Freeport McMoRan
The main advantage of trading using opposite European Metals and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. Tyson Foods Cl | European Metals vs. Datagroup SE | European Metals vs. First Class Metals | European Metals vs. Dairy Farm International |
| Freeport McMoRan vs. Empire Metals Limited | Freeport McMoRan vs. Lundin Mining Corp | Freeport McMoRan vs. Vitec Software Group | Freeport McMoRan 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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