Correlation Between Freeport McMoRan and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Universal Insurance 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 Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Universal Insurance Holdings, you can compare the effects of market volatilities on Freeport McMoRan and Universal Insurance 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 Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Universal Insurance.
Diversification Opportunities for Freeport McMoRan and Universal Insurance
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Freeport and Universal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Universal Insurance go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Universal Insurance
Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 1.09 times more return on investment than Universal Insurance. However, Freeport McMoRan is 1.09 times more volatile than Universal Insurance Holdings. It trades about 0.22 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.13 per unit of risk. If you would invest 3,643 in Freeport McMoRan on October 20, 2024 and sell it today you would earn a total of 298.00 from holding Freeport McMoRan or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Freeport McMoRan vs. Universal Insurance Holdings
Performance |
| Timeline |
| Freeport McMoRan |
| Universal Insurance |
Freeport McMoRan and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Universal Insurance
The main advantage of trading using opposite Freeport McMoRan and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Universal Insurance 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.| Freeport McMoRan vs. Southern Copper | Freeport McMoRan vs. Antofagasta plc | Freeport McMoRan vs. First Quantum Minerals | Freeport McMoRan vs. KGHM Polska Miedz |
| Universal Insurance vs. Ryanair Holdings plc | Universal Insurance vs. United Utilities Group | Universal Insurance vs. Fair Isaac Corp | Universal Insurance vs. HUTCHISON TELECOMM |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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