Correlation Between First Quantum and Freeport McMoRan

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

By analyzing existing cross correlation between First Quantum Minerals and Freeport McMoRan, you can compare the effects of market volatilities on First Quantum 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 First Quantum with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Quantum and Freeport McMoRan.

Diversification Opportunities for First Quantum and Freeport McMoRan

0.94

Correlation Coefficient

First Quantum  Freeport McMoRan

Almost no diversification

The 3 months correlation between First and Freeport is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and First Quantum 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 First Quantum Minerals 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 First Quantum i.e., First Quantum and Freeport McMoRan go up and down completely randomly.

Pair Corralation between First Quantum and Freeport McMoRan

Assuming the 90 days horizon First Quantum Minerals is expected to generate 0.89 times more return on investment than Freeport McMoRan. However, First Quantum Minerals is 1.12 times less risky than Freeport McMoRan. It trades about 0.26 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.18 per unit of risk. If you would invest  1,003  in First Quantum Minerals on April 21, 2025 and sell it today you would earn a total of  464.00  from holding First Quantum Minerals or generate 46.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

First Quantum Minerals  vs.  Freeport McMoRan

First Quantum Minerals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Freeport McMoRan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoRan are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Freeport McMoRan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Quantum and Freeport McMoRan

The main advantage of trading using opposite First Quantum and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Quantum 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.

The idea behind First Quantum Minerals and Freeport McMoRan 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.