Correlation Between Consolidated Communications and Freeport McMoRan

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Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and Freeport McMoRan, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Freeport McMoRan.

Diversification Opportunities for Consolidated Communications and Freeport McMoRan

-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Consolidated and Freeport is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Consolidated Communications and Freeport McMoRan

Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.58 times more return on investment than Freeport McMoRan. However, Consolidated Communications Holdings is 1.73 times less risky than Freeport McMoRan. It trades about 0.07 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.02 per unit of risk. If you would invest  342.00  in Consolidated Communications Holdings on October 5, 2024 and sell it today you would earn a total of  106.00  from holding Consolidated Communications Holdings or generate 30.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy99.68%
ValuesDaily Returns

Consolidated Communications Ho  vs.  Freeport McMoRan

 Performance 
       Timeline  
Consolidated Communications 

Risk-Adjusted Performance

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Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Freeport McMoRan 

Risk-Adjusted Performance

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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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Consolidated Communications and Freeport McMoRan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Consolidated Communications and Freeport McMoRan

The main advantage of trading using opposite Consolidated Communications and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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