Correlation Between Freeport McMoRan and Grupo Hotelero
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Grupo Hotelero 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 Grupo Hotelero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Grupo Hotelero Santa, you can compare the effects of market volatilities on Freeport McMoRan and Grupo Hotelero 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 Grupo Hotelero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Grupo Hotelero.
Diversification Opportunities for Freeport McMoRan and Grupo Hotelero
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Freeport and Grupo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Grupo Hotelero Santa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Hotelero Santa 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 Grupo Hotelero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Hotelero Santa has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Grupo Hotelero go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Grupo Hotelero
Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 1.15 times more return on investment than Grupo Hotelero. However, Freeport McMoRan is 1.15 times more volatile than Grupo Hotelero Santa. It trades about 0.02 of its potential returns per unit of risk. Grupo Hotelero Santa is currently generating about 0.01 per unit of risk. If you would invest 75,963 in Freeport McMoRan on September 4, 2024 and sell it today you would earn a total of 11,537 from holding Freeport McMoRan or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Freeport McMoRan vs. Grupo Hotelero Santa
Performance |
| Timeline |
| Freeport McMoRan |
| Grupo Hotelero Santa |
Freeport McMoRan and Grupo Hotelero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Grupo Hotelero
The main advantage of trading using opposite Freeport McMoRan and Grupo Hotelero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Grupo Hotelero 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 Grupo Hotelero will offset losses from the drop in Grupo Hotelero's long position.| Freeport McMoRan vs. Southern Copper | Freeport McMoRan vs. Grupo Hotelero Santa | Freeport McMoRan vs. The Walt Disney | Freeport McMoRan vs. International Business Machines |
| Grupo Hotelero vs. United Airlines Holdings | Grupo Hotelero vs. Cognizant Technology Solutions | Grupo Hotelero vs. Micron Technology | Grupo Hotelero vs. Prudential 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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