Correlation Between Falcon Oil and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Falcon Oil 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 Falcon Oil and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Oil Gas and Freeport McMoRan, you can compare the effects of market volatilities on Falcon Oil 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 Falcon Oil with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and Freeport McMoRan.
Diversification Opportunities for Falcon Oil and Freeport McMoRan
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Falcon and Freeport is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Falcon Oil 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 Falcon Oil Gas 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 Falcon Oil i.e., Falcon Oil and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Falcon Oil and Freeport McMoRan
Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the Freeport McMoRan. In addition to that, Falcon Oil is 1.32 times more volatile than Freeport McMoRan. It trades about -0.03 of its total potential returns per unit of risk. Freeport McMoRan is currently generating about 0.01 per unit of volatility. If you would invest 3,823 in Freeport McMoRan on September 23, 2024 and sell it today you would earn a total of 75.00 from holding Freeport McMoRan or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Oil Gas vs. Freeport McMoRan
Performance |
| Timeline |
| Falcon Oil Gas |
| Freeport McMoRan |
Falcon Oil and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Oil and Freeport McMoRan
The main advantage of trading using opposite Falcon Oil and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil 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.| Falcon Oil vs. Zoom Video Communications | Falcon Oil vs. Enbridge | Falcon Oil vs. Endo International PLC | Falcon Oil vs. XLMedia PLC |
| Freeport McMoRan vs. Uniper SE | Freeport McMoRan vs. Mulberry Group PLC | Freeport McMoRan vs. London Security Plc | Freeport McMoRan vs. Triad Group PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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