Correlation Between International Business and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Freeport McMoRan, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Freeport McMoRan.
Diversification Opportunities for International Business and Freeport McMoRan
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and Freeport is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and International Business 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 International Business Machines 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 International Business i.e., International Business and Freeport McMoRan go up and down completely randomly.
Pair Corralation between International Business and Freeport McMoRan
Assuming the 90 days trading horizon International Business Machines is expected to generate 1.25 times more return on investment than Freeport McMoRan. However, International Business is 1.25 times more volatile than Freeport McMoRan. It trades about 0.25 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.18 per unit of risk. If you would invest 432,777 in International Business Machines on September 12, 2024 and sell it today you would earn a total of 41,523 from holding International Business Machines or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Freeport McMoRan
Performance |
| Timeline |
| International Business |
| Freeport McMoRan |
International Business and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Freeport McMoRan
The main advantage of trading using opposite International Business and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.| International Business vs. Cognizant Technology Solutions | International Business vs. DXC Technology | International Business vs. The Select Sector | International Business vs. Promotora y Operadora |
| Freeport McMoRan vs. Southern Copper | Freeport McMoRan vs. The Select Sector | Freeport McMoRan vs. Promotora y Operadora | Freeport McMoRan vs. iShares Global Timber |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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