Correlation Between Freeport McMoRan and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and Silicon Motion 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 Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan and Silicon Motion Technology, you can compare the effects of market volatilities on Freeport McMoRan and Silicon Motion 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 Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Silicon Motion.
Diversification Opportunities for Freeport McMoRan and Silicon Motion
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Freeport and Silicon is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology 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 Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Silicon Motion go up and down completely randomly.
Pair Corralation between Freeport McMoRan and Silicon Motion
Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the Silicon Motion. In addition to that, Freeport McMoRan is 1.18 times more volatile than Silicon Motion Technology. It trades about -0.09 of its total potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.01 per unit of volatility. If you would invest 5,200 in Silicon Motion Technology on November 3, 2024 and sell it today you would lose (50.00) from holding Silicon Motion Technology or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoRan vs. Silicon Motion Technology
Performance |
| Timeline |
| Freeport McMoRan |
| Silicon Motion Technology |
Freeport McMoRan and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoRan and Silicon Motion
The main advantage of trading using opposite Freeport McMoRan and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.| Freeport McMoRan vs. Avanos Medical | Freeport McMoRan vs. Scandinavian Tobacco Group | Freeport McMoRan vs. Inspire Medical Systems | Freeport McMoRan vs. SLR Investment Corp |
| Silicon Motion vs. PACIFIC ONLINE | Silicon Motion vs. MHP Hotel AG | Silicon Motion vs. INTERCONT HOTELS | Silicon Motion vs. SALESFORCE INC CDR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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