Correlation Between Freeport McMoran and Constellium
Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Constellium 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 Constellium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoran Copper Gold and Constellium Nv, you can compare the effects of market volatilities on Freeport McMoran and Constellium 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 Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Constellium.
Diversification Opportunities for Freeport McMoran and Constellium
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Freeport and Constellium is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv 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 Copper Gold are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Constellium go up and down completely randomly.
Pair Corralation between Freeport McMoran and Constellium
Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.85 times more return on investment than Constellium. However, Freeport McMoran Copper Gold is 1.18 times less risky than Constellium. It trades about 0.03 of its potential returns per unit of risk. Constellium Nv is currently generating about 0.02 per unit of risk. If you would invest 3,713 in Freeport McMoran Copper Gold on September 5, 2024 and sell it today you would earn a total of 670.00 from holding Freeport McMoran Copper Gold or generate 18.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoran Copper Gold vs. Constellium Nv
Performance |
| Timeline |
| Freeport McMoran Copper |
| Constellium Nv |
Freeport McMoran and Constellium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoran and Constellium
The main advantage of trading using opposite Freeport McMoran and Constellium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, Constellium 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 Constellium will offset losses from the drop in Constellium's long position.| Freeport McMoran vs. Constellium Nv | Freeport McMoran vs. Century Aluminum | Freeport McMoran vs. China Hongqiao Group | Freeport McMoran vs. Kaiser Aluminum |
| Constellium vs. Century Aluminum | Constellium vs. Alcoa Corp | Constellium vs. China Hongqiao Group | Constellium vs. Norsk Hydro ASA |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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