Correlation Between Freeport McMoRan and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Verizon Communications, you can compare the effects of market volatilities on Freeport McMoRan and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Verizon Communications.
Diversification Opportunities for Freeport McMoRan and Verizon Communications
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Freeport and Verizon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Verizon Communications go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Verizon Communications
Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 1.13 times less return on investment than Verizon Communications. In addition to that, Freeport McMoRan is 1.53 times more volatile than Verizon Communications. It trades about 0.03 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.05 per unit of volatility. If you would invest 65,165 in Verizon Communications on September 3, 2024 and sell it today you would earn a total of 25,585 from holding Verizon Communications or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoRan vs. Verizon Communications
Performance |
| Timeline |
| Freeport McMoRan |
| Verizon Communications |
Freeport McMoRan and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Verizon Communications
The main advantage of trading using opposite Freeport McMoRan and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Freeport McMoRan vs. Applied Materials | Freeport McMoRan vs. Verizon Communications | Freeport McMoRan vs. Grupo Hotelero Santa | Freeport McMoRan vs. Ameriprise Financial |
| Verizon Communications vs. FibraHotel | Verizon Communications vs. Applied Materials | Verizon Communications vs. Lloyds Banking Group | Verizon Communications vs. McEwen Mining |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Transaction History View history of all your transactions and understand their impact on performance |