Correlation Between Freeport McMoRan and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Southern Copper 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 Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Southern Copper, you can compare the effects of market volatilities on Freeport McMoRan and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Southern Copper.
Diversification Opportunities for Freeport McMoRan and Southern Copper
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freeport and Southern is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Southern Copper go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Southern Copper
Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the Southern Copper. But the stock apears to be less risky and, when comparing its historical volatility, Freeport McMoRan is 1.55 times less risky than Southern Copper. The stock trades about -0.06 of its potential returns per unit of risk. The Southern Copper is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,492 in Southern Copper on September 13, 2024 and sell it today you would earn a total of 344.00 from holding Southern Copper or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoRan vs. Southern Copper
Performance |
| Timeline |
| Freeport McMoRan |
| Southern Copper |
Freeport McMoRan and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Southern Copper
The main advantage of trading using opposite Freeport McMoRan and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.| Freeport McMoRan vs. Southern Copper | Freeport McMoRan vs. Sandfire Resources Limited | Freeport McMoRan vs. Superior Plus Corp | Freeport McMoRan vs. NMI Holdings |
| Southern Copper vs. Sandfire Resources Limited | Southern Copper vs. Superior Plus Corp | Southern Copper vs. NMI Holdings | Southern Copper vs. SIVERS SEMICONDUCTORS AB |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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