Correlation Between Empire State and Freeport

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

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

Diversification Opportunities for Empire State and Freeport

-0.2

Correlation Coefficient

Empire State  Freeport

Good diversification

The 3 months correlation between Empire and Freeport is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty 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 Empire State 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 Empire State Realty 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 Empire State i.e., Empire State and Freeport go up and down completely randomly.

Pair Corralation between Empire State and Freeport

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Freeport. In addition to that, Empire State is 8.23 times more volatile than Freeport McMoRan 5 percent. It trades about -0.18 of its total potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about -0.01 per unit of volatility. If you would invest  9,996  in Freeport McMoRan 5 percent on December 25, 2024 and sell it today you would lose (24.00) from holding Freeport McMoRan 5 percent or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.52%
Values	Daily Returns

Empire State Realty  vs.  Freeport McMoRan 5 percent

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Freeport McMoRan 5

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Empire State and Freeport

The main advantage of trading using opposite Empire State and Freeport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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 Empire State Realty 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.