Correlation Between Freeport McMoRan and Lennar Corp

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

By analyzing existing cross correlation between Freeport McMoRan and Lennar Corp Cl, you can compare the effects of market volatilities on Freeport McMoRan and Lennar Corp 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 Lennar Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and Lennar Corp.

Diversification Opportunities for Freeport McMoRan and Lennar Corp

0.9

Correlation Coefficient

Freeport McMoRan  Lennar Corp

Almost no diversification

The 3 months correlation between Freeport and Lennar is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Lennar Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar Corp Cl 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 are associated (or correlated) with Lennar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar Corp Cl has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Lennar Corp go up and down completely randomly.

Pair Corralation between Freeport McMoRan and Lennar Corp

Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 1.09 times more return on investment than Lennar Corp. However, Freeport McMoRan is 1.09 times more volatile than Lennar Corp Cl. It trades about -0.37 of its potential returns per unit of risk. Lennar Corp Cl is currently generating about -0.56 per unit of risk. If you would invest  4,295  in Freeport McMoRan on October 6, 2024 and sell it today you would lose (533.00) from holding Freeport McMoRan or give up 12.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

Freeport McMoRan  vs.  Lennar Corp Cl

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lennar Corp Cl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar Corp Cl 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Freeport McMoRan and Lennar Corp

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

The idea behind Freeport McMoRan and Lennar Corp Cl 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.