Correlation Between Smithson Investment and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Smithson Investment 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 Smithson Investment and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Freeport McMoRan, you can compare the effects of market volatilities on Smithson Investment 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 Smithson Investment with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Freeport McMoRan.
Diversification Opportunities for Smithson Investment and Freeport McMoRan
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smithson and Freeport is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Smithson Investment 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Smithson Investment and Freeport McMoRan
Assuming the 90 days trading horizon Smithson Investment Trust is expected to generate 0.57 times more return on investment than Freeport McMoRan. However, Smithson Investment Trust is 1.76 times less risky than Freeport McMoRan. It trades about 0.01 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.0 per unit of risk. If you would invest 140,100 in Smithson Investment Trust on October 12, 2024 and sell it today you would earn a total of 4,300 from holding Smithson Investment Trust or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Smithson Investment Trust vs. Freeport McMoRan
Performance |
| Timeline |
| Smithson Investment Trust |
| Freeport McMoRan |
Smithson Investment and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Freeport McMoRan
The main advantage of trading using opposite Smithson Investment and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment 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.| Smithson Investment vs. Blackstone Loan Financing | Smithson Investment vs. First Class Metals | Smithson Investment vs. Empire Metals Limited | Smithson Investment vs. Ross Stores |
| Freeport McMoRan vs. New Residential Investment | Freeport McMoRan vs. alstria office REIT AG | Freeport McMoRan vs. Taylor Maritime Investments | Freeport McMoRan vs. Beazer Homes USA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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