Correlation Between ONEOK and Freeport McMoRan

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

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

Diversification Opportunities for ONEOK and Freeport McMoRan

-0.66

Correlation Coefficient

ONEOK  Freeport McMoRan

Excellent diversification

The 3 months correlation between ONEOK and Freeport is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and ONEOK 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 ONEOK Inc 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 ONEOK i.e., ONEOK and Freeport McMoRan go up and down completely randomly.

Pair Corralation between ONEOK and Freeport McMoRan

Assuming the 90 days trading horizon ONEOK Inc is expected to generate 0.66 times more return on investment than Freeport McMoRan. However, ONEOK Inc is 1.52 times less risky than Freeport McMoRan. It trades about 0.08 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.01 per unit of risk. If you would invest  5,747  in ONEOK Inc on September 23, 2024 and sell it today you would earn a total of  4,238  from holding ONEOK Inc or generate 73.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

ONEOK Inc  vs.  Freeport McMoRan

ONEOK Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ONEOK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ONEOK and Freeport McMoRan

The main advantage of trading using opposite ONEOK and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK 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 ONEOK Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.