Correlation Between Chevron Corp and Freeport

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

By analyzing existing cross correlation between Chevron Corp and Freeport McMoRan 54 percent, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Freeport.

Diversification Opportunities for Chevron Corp and Freeport

-0.46

Correlation Coefficient

Chevron Corp  Freeport

Very good diversification

The 3 months correlation between Chevron and Freeport is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Freeport McMoRan 54 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Chevron Corp 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 Chevron Corp 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 has no effect on the direction of Chevron Corp i.e., Chevron Corp and Freeport go up and down completely randomly.

Pair Corralation between Chevron Corp and Freeport

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Freeport. In addition to that, Chevron Corp is 1.78 times more volatile than Freeport McMoRan 54 percent. It trades about -0.01 of its total potential returns per unit of risk. Freeport McMoRan 54 percent is currently generating about 0.01 per unit of volatility. If you would invest  9,451  in Freeport McMoRan 54 percent on September 19, 2024 and sell it today you would earn a total of  362.00  from holding Freeport McMoRan 54 percent or generate 3.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Chevron Corp  vs.  Freeport McMoRan 54 percent

Chevron Corp

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 54 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 Chevron Corp and Freeport

The main advantage of trading using opposite Chevron Corp and Freeport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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 Chevron Corp and Freeport McMoRan 54 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.