Correlation Between Freeport McMoRan and Antofagasta Plc
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Antofagasta Plc 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 Antofagasta Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Antofagasta plc, you can compare the effects of market volatilities on Freeport McMoRan and Antofagasta Plc 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 Antofagasta Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Antofagasta Plc.
Diversification Opportunities for Freeport McMoRan and Antofagasta Plc
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freeport and Antofagasta is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Antofagasta plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta plc 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 Antofagasta Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta plc has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Antofagasta Plc go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Antofagasta Plc
Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 1.03 times more return on investment than Antofagasta Plc. However, Freeport McMoRan is 1.03 times more volatile than Antofagasta plc. It trades about 0.22 of its potential returns per unit of risk. Antofagasta plc is currently generating about 0.17 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 Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Freeport McMoRan vs. Antofagasta plc
Performance |
| Timeline |
| Freeport McMoRan |
| Antofagasta plc |
Freeport McMoRan and Antofagasta Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Antofagasta Plc
The main advantage of trading using opposite Freeport McMoRan and Antofagasta Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Antofagasta Plc 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 Antofagasta Plc will offset losses from the drop in Antofagasta Plc'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 |
| Antofagasta Plc vs. Freeport McMoRan | Antofagasta Plc vs. Southern Copper | Antofagasta Plc vs. First Quantum Minerals | Antofagasta Plc vs. KGHM Polska Miedz |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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