Correlation Between Freeport McMoRan and Centaur Media

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

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

Diversification Opportunities for Freeport McMoRan and Centaur Media

0.58

Correlation Coefficient

Freeport McMoRan  Centaur Media

Very weak diversification

The 3 months correlation between Freeport and Centaur is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Centaur Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaur Media 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 Centaur Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaur Media has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Centaur Media go up and down completely randomly.

Pair Corralation between Freeport McMoRan and Centaur Media

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the Centaur Media. But the stock apears to be less risky and, when comparing its historical volatility, Freeport McMoRan is 1.57 times less risky than Centaur Media. The stock trades about -0.21 of its potential returns per unit of risk. The Centaur Media is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  2,990  in Centaur Media on October 8, 2024 and sell it today you would lose (690.00) from holding Centaur Media or give up 23.08% of portfolio value over 90 days.

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

Freeport McMoRan  vs.  Centaur Media

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Centaur Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaur Media 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Freeport McMoRan and Centaur Media

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

The idea behind Freeport McMoRan and Centaur Media 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.