Correlation Between Aptiv PLC and Freeport

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

By analyzing existing cross correlation between Aptiv PLC and Freeport McMoRan 5 percent, you can compare the effects of market volatilities on Aptiv PLC and Freeport 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 Aptiv PLC with a short position of Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Freeport.

Diversification Opportunities for Aptiv PLC and Freeport

0.27

Correlation Coefficient

Aptiv PLC  Freeport

Modest diversification

The 3 months correlation between Aptiv and Freeport is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 and Aptiv PLC 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 Aptiv PLC are associated (or correlated) with Freeport. 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 5 has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Freeport go up and down completely randomly.

Pair Corralation between Aptiv PLC and Freeport

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the Freeport. In addition to that, Aptiv PLC is 5.84 times more volatile than Freeport McMoRan 5 percent. It trades about -0.1 of its total potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about -0.12 per unit of volatility. If you would invest  10,055  in Freeport McMoRan 5 percent on September 20, 2024 and sell it today you would lose (363.00) from holding Freeport McMoRan 5 percent or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Aptiv PLC  vs.  Freeport McMoRan 5 percent

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Freeport McMoRan 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 5 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aptiv PLC and Freeport

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

The idea behind Aptiv PLC and Freeport McMoRan 5 percent 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.