Correlation Between Freeport McMoran and Moodys

Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Moodys 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 Moodys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freeport McMoran Copper Gold and Moodys, you can compare the effects of market volatilities on Freeport McMoran and Moodys 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 Moodys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Moodys.

Diversification Opportunities for Freeport McMoran and Moodys

-0.17

Correlation Coefficient

Freeport McMoran  Moodys

Good diversification

The 3 months correlation between Freeport and Moodys is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Copper Gold are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Moodys go up and down completely randomly.

Pair Corralation between Freeport McMoran and Moodys

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 1.81 times more return on investment than Moodys. However, Freeport McMoran is 1.81 times more volatile than Moodys. It trades about 0.07 of its potential returns per unit of risk. Moodys is currently generating about -0.11 per unit of risk. If you would invest  4,903  in Freeport McMoran Copper Gold on February 4, 2024 and sell it today you would earn a total of  142.00  from holding Freeport McMoran Copper Gold or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Freeport McMoran Copper Gold  vs.  Moodys

Freeport McMoran Copper

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Freeport McMoran showed solid returns over the last few months and may actually be approaching a breakup point.

Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Freeport McMoran and Moodys

The main advantage of trading using opposite Freeport McMoran and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, Moodys 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 Moodys will offset losses from the drop in Moodys' long position.

The idea behind Freeport McMoran Copper Gold and Moodys pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.