Correlation Between Capstone Copper and Freeport McMoran

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

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

Diversification Opportunities for Capstone Copper and Freeport McMoran

0.91

Correlation Coefficient

Capstone Copper  Freeport McMoran

Almost no diversification

The 3 months correlation between Capstone and Freeport is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Copper Corp and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Capstone Copper 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 Capstone Copper Corp 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 Copper has no effect on the direction of Capstone Copper i.e., Capstone Copper and Freeport McMoran go up and down completely randomly.

Pair Corralation between Capstone Copper and Freeport McMoran

Assuming the 90 days horizon Capstone Copper Corp is expected to under-perform the Freeport McMoran. In addition to that, Capstone Copper is 1.29 times more volatile than Freeport McMoran Copper Gold. It trades about -0.07 of its total potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about -0.05 per unit of volatility. If you would invest  4,440  in Freeport McMoran Copper Gold on September 20, 2024 and sell it today you would lose (378.00) from holding Freeport McMoran Copper Gold or give up 8.51% of portfolio value over 90 days.

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

Capstone Copper Corp  vs.  Freeport McMoran Copper Gold

Capstone Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Freeport McMoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoran Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Capstone Copper and Freeport McMoran

The main advantage of trading using opposite Capstone Copper and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Copper 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 Capstone Copper Corp and Freeport McMoran Copper Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.