Correlation Between AEON STORES and Freeport McMoRan

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

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

Diversification Opportunities for AEON STORES and Freeport McMoRan

0.28

Correlation Coefficient

AEON STORES  Freeport McMoRan

Modest diversification

The 3 months correlation between AEON and Freeport is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and AEON STORES 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 AEON STORES 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 AEON STORES i.e., AEON STORES and Freeport McMoRan go up and down completely randomly.

Pair Corralation between AEON STORES and Freeport McMoRan

Assuming the 90 days trading horizon AEON STORES is expected to generate 0.31 times more return on investment than Freeport McMoRan. However, AEON STORES is 3.24 times less risky than Freeport McMoRan. It trades about -0.17 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.06 per unit of risk. If you would invest  6.60  in AEON STORES on September 29, 2024 and sell it today you would lose (0.95) from holding AEON STORES or give up 14.39% of portfolio value over 90 days.

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

AEON STORES  vs.  Freeport McMoRan

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AEON STORES and Freeport McMoRan

The main advantage of trading using opposite AEON STORES and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES 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 AEON STORES 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.